A blind market, overwhelmed by data gaps and unexpected cuts. When rationality turns to fear, liquidity dries up.
To be blunt: it was the layoffs and the ongoing federal government shutdown in the United States. This time, the market didn’t react with euphoria or panic: it simply turned off the lights. It went blind, deprived of reliable macroeconomic indicators, and did what a rational organism does in the face of uncertainty: it defended itself. It liquidated positions, reduced risk, and moved to cash. And this is precisely where the greatest contradiction arises: in an attempt to protect itself, it triggered the sell-off it wanted to avoid.
The apparent cause? Weak employment data. The real cause? The information blackout generated by the federal government shutdown, combined with a wave of cuts in the most promising sector of the decade: artificial intelligence.
The long wave of layoffs in AI
Meta announced about 600 layoffs in its AI division, confirming a trend that is spreading across the entire Big Tech sector. In recent months, the mix of billion-dollar investments and cost-cutting measures has become the new normal.
Accenture, after signing a major partnership with Snorkel AI, cut 13% of its workforce. Meta, for its part, actively invested in Scale AI and immediately thereafter reduced its workforce by 14%.
An apparent paradox: the sector that promises to revolutionize the world of work is actually already cutting jobs.
According to some estimates, AI could eliminate between 80 and 85 million jobs within three years, but create up to 170 million new ones.
In the short term, however, what the market sees is only the first part of the equation: destruction, not creation.
This perceptual asymmetry is what fuels fear. And in finance, fear has an immediate effect: cash becomes the ultimate safe haven.
The Data Blackout: The Federal Shutdown
The situation worsened in mid-October, when the US federal government shut down.
A not uncommon event, but this time, a lengthy one. Approximately 750,000 federal workers were furloughed, equivalent to nearly 0.4% of the US civilian workforce.
But the problem isn’t just economic: it’s informational. With the Bureau of Labor Statistics closed, official employment data isn’t being published. The Federal Reserve Bank of Chicago estimated the unemployment rate at around 4.36%, rounded to 4.4% for market projections. But this is an estimate, not a verified figure. And in the financial world, the difference between an estimate and an actual figure can be worth trillions.
Without reliable references, technical analysis algorithms and sentiment analysis models lose their effectiveness.
The result is a market navigating blindly, where every negative signal is amplified and interpreted as confirmation of a bearish trend.
Domino Effect on Confidence
The shutdown isn’t just an administrative blockade: it’s a collective psychological event.
While public sector workers remain without pay, anxiety is growing among those dependent on federal benefits, such as the SNAP program.
This tension is reflected in data, when available, on consumer confidence, which is starting to deteriorate. And when confidence declines, the willingness to spend also weakens.
Expectations of higher unemployment fueled a short-lived bond rally, but the uncertainty over fiscal and monetary policy quickly reversed the trend.
The result is a highly erratic market, where every good news is seen as "too good to last" and every bad news becomes "proof that we were right to sell."
When market logic becomes self-destructive
The financial market tends to behave like a collective organism, rational but hypersensitive. When data is lacking, it reacts to what it perceives, not what it knows. And in this case, what it perceives is a toxic mix of economic uncertainty, political instability, and fears for employment.
Every fund, every trading desk, every momentum-based algorithm acts as part of a chain of interconnected reactions.
A small signal, such as a revision to the estimated unemployment rate, can become the trigger for an explosion of volatility. Liquidity evaporates, spreads widen, and correlations soar.
The result is a self-reinforcing phenomenon: the more the market liquidates, the more prices fall, the more volatility increases.
And the more volatility increases, the more the market liquidates. A perfectly rational dynamic in the short term, but devastating in the long term.
The Intelligence Paradox
There’s a subtle irony in all this.
The world’s most advanced economy is facing a crisis of confidence fueled by intelligence, both artificial and collective. The former cuts jobs to increase efficiency, the latter reacts irrationally to incomplete data.
The real risk today isn’t a sudden recession, but a crisis of perception—a collapse of confidence that first shows up in the charts, and only later in the real economy. As long as the shutdown continues, and as long as news from the tech giants continues to oscillate between euphoria and cuts, the market will remain stuck in this informational limbo.
There’s no point in panicking, but neither should we pretend that nothing is happening. Because uncertainty is already a given. And in a world where data is lacking, it’s the only thing that really matters.
Original article published on Money.it Italy 2025-11-10 17:52:00. Original title: Cosa ha (davvero) causato il crollo del mercato?
