November 18th, 2025, marked a day of intense market scrutiny, particularly concerning AI valuations, which triggered a concentrated sell-off in tech stocks but was met with surprising resilience in the Treasury market, influenced by Federal Reserve policy signals.
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Welcome to the deep dive. Today we are
focusing on one well what one incredibly
intense and revealing day in the
markets. November 18th, 2025.
>> It really was. This was a day the market
couldn't look away from the mirror.
>> Exactly. We saw this uh aggressive
skepticism about the biggest financial
driver of the year, artificial intelligence.
intelligence.
>> Right. The valuations
>> and the ripples from that fear, they hit
everything. the stock market, the
treasury market, global credit, and you
know, even the yield on your money
market account.
>> It was a classic riskoff environment,
but uh with a really complex twist. So,
our mission today is to take this stack
of sources. We've got market recaps, Fed
notes, liquidity reports, and just
dissect how worries about a potential AI
bubble were transmitted across the whole
financial system.
>> We're looking for those subtle
connections, right? The things that
explain why a stock dropping in Seattle
suddenly affects a 10-year bond in New York.
York.
>> Precisely. We're giving you the shortcut
to understanding a day that was just
full of volatility and and deep
underlying tension.
>> Okay, let's unpack this. Starting with
the equity carnage.
>> The pain was definitely most visible there.
there.
>> The headlines were I mean they were just
screaming panic. You had the Dow Jones
fall what about 1.1%.
>> Yeah. Shedding roughly 500 points and
the S&P 500 dropped 8% which was its
fourth straight day of decline.
>> And the Nasdaq Composite,
>> you know, the traditional home of tech,
it led the whole descent falling 1.2%.
Now, if you only look at those headline
numbers, you might think it was uh a
universal crash,
>> right? Like everything was on fire.
>> But here's the key difference our
sources reveal.
This was a highly concentrated sell-off.
Nearly 60% of the S&P 500 components
actually ended the day higher.
>> So, this wasn't a general panic about
the economy.
>> No, not at all. This was a targeted
strike against a specific narrative, the
unchecked optimism around mega cap tech
and AI. Okay. And that narrative is now
facing some serious structural scrutiny,
isn't it?
>> It is. We are seeing just heightened
skepticism around AI valuations fueling
these fears that we're in the middle of
a bubble that might be ready to pop.
>> And this isn't just, you know, retail
investor fear.
>> No, this is institutional. A Bank of
America survey cited in our material
named AI as the top tail risk for 45% of
fund managers.
>> Wait, hold on. For the listener who
might be less familiar, how should we
define tail risk in this context?
>> Good question. Think of tail risk as a
worst case scenario. An event that you
know has a low probability but a
potentially catastrophic impact if it happens.
happens. >> Okay?
>> Okay?
>> So for nearly half of the big money
managers, that catastrophe isn't
inflation or a war. It's the potential
implosion of the AI sector's perceived
value. And that fear, it translated
directly into selling pressure on
individual names.
>> Right? We saw Nvidia, the poster child
for the whole AI chip movement, extended
slide by another 2% ahead of some really
crucial quarterly earnings.
>> And it went far beyond just the hardware
firms. Oh yeah. The cloud and software
giants got hit hard by a mix of that
skepticism and uh regulatory pressure.
Amazon fell a staggering 4.4%. >> 4.4
>> 4.4
>> and Microsoft dropped 2.7%. Both of them
were dealing with ratings downgrades and
these EU antitrust probes into their
cloud services. And all that pressure
pulled the entire PHL semiconductor
index into correction territory,
>> which is basically the health check for
all the hardware enabling our digital world.
world.
>> Exactly. So seeing that index slide
suggests people are pulling back their
bets on future infrastructure spending.
>> Precisely. We saw stocks like Western
Digital and Micron Technology key memory
and storage providers both falling over
5.5%. If the chips that power the future
are suddenly worth less,
>> the market is signaling doubt about the
timeline or, you know, the scale of that future.
future.
>> And we should remember this wasn't only
about abstract valuations. We saw some
real economic headwinds confirmed on the
very same day.
>> That's a vital piece of context.
>> Home Depot, which is such a barometer
for housing and consumer health,
plummeted 6% after slashing its fullear outlook.
outlook.
>> And they were explicit about why. They
cited subdued home improvement demand
because of high interest rates. So you
have two separate forces hitting the market,
market,
>> right? You have speculation fatigue and
tech and you have real policy pain.
Those high interest rates hitting main
street companies.
>> But the money wasn't just leaving the
market, was it? It was shifting.
>> It is rotating. Metronic rose 5% and
Merc gained nearly 4%. Investors were
actively moving into defensive sectors
like healthcare and just getting away
from speculative growth.
>> And this US weakness, it immediately
infected markets overseas.
>> It did. Global capital is just too
interconnected now. Japan's Niki 225 and
South Korea's Cosby both fell over 3%.
Largely veering that tech heavy NASDAQ drop.
drop.
>> Even Bitcoin got hit.
>> Yep. Even volatile assets like Bitcoin,
which sometimes trades as a hedge, were
affected. It dipped below $89,300
overnight before showing some resilience
and rebounding above $92,000.
>> That level of interconnected chaos,
>> it's why the bond market reaction is
maybe the most surprising part of the
whole day. Here's where it gets really
interesting. Yeah. How do the bond
market react to this stock market fear?
>> Let's pivot to the debt side of the
ledger. So, historically, when stocks
tank like that, money just floods into
the ultimate safe asset, US Treasury bonds,
bonds,
>> which causes bond prices to sore and
yields, the return you get to drop
dramatically. So, on November 18th, did
we see that dramatic yield drop?
>> Well, we saw an attempt at it, but it
was quickly tempered.
>> Okay. the benchmark 10-year Treasury
yield, which is our proxy for long-term
borrowing costs, it oscillated. It eased
overall only slightly from 4.13% to
around 4.12% by the close.
>> So, the real insight isn't the final
number. It's the pattern.
>> Exactly. There was a distinct dip in the
early session, possibly down to 4.10%,
but then it recovered most of that
ground. The market was volatile, but the
yield was surprisingly stable given the
equity carnage. Let's break down that
tension. The initial dip, that flight to
quality, that makes sense. Fear drives
money into bonds.
>> Classic safety trade. And it was
compounded by another factor. A huge
release of delayed economic data after
that recent government shutdown. >> Right.
>> Right.
>> That data included sentiment surveys
showing a notable drop in personal
finances, which just increased the
overall economic jitters and pushed
yields lower.
>> But the recovery is the puzzle. Why if
the economic data was shaky and stocks
were falling, did the yield refuse to
just collapse?
>> That's where Federal Reserve policy
signals came into play. And this is
where the clarity is so crucial.
>> The market was already split. The odds
of a December rate cut were hovering
around 50/50. The bond market needed
some direction
>> and the Fed gave it to them. They
announced they intend to resume bond
purchases soon. Right.
>> Yes. But this is a deeply nuanced signal
that really requires unpacking. The Fed
said these purchases were aimed at
managing reserves and maintaining
liquidity in the banking system.
>> So just ensuring the plumbing of the
financial system works smoothly.
>> Precisely. And crucially,
they went to great lengths to emphasize
this is not a signal of quantitative
easing or some big change in monetary
policy to fight a recession. So, if the
market was already spooked, wouldn't
announcing any kind of bond purchase,
even for reserve management risk, being
seen as panic easing, which would drive
yields down even further?
>> That was the danger. Absolutely. But the
recovery suggests the message actually resonated.
resonated.
>> The quick bounce back in the yield
indicates traders accepted the Fed's
insistence that this was a technical
move to keep banks stable, not an
economic asing signal. It prevented that
full-blown yield collapse. So the Fed
basically stabilized expectations
without hitting the panic button.
>> That's a great way to put it. And
contextually, this volatility was milder
than what we saw earlier in the year.
>> Right back in that April stock crash,
yields spiked to 4.5% because of those
tariff announcements.
>> So this November action, though
turbulent, seems like part of a
stabilization phase now that the Fed's
intentions are a bit clearer.
>> Okay, so we've tracked the fear from
stock valuations into the safe haven of
treasuries. We've seen the Fed step in
to stabilize things. Now, let's connect
the dots for you, the listener. How do
these yield swings affect global credit,
global liquidity, and what does it mean
for your cash in a money market account?
>> Looking globally, a sustained drop in
the 10-year yield typically enhances
global liquidity.
>> Why is that?
>> Because the US 10ear is the benchmark
for borrowing costs worldwide. So, if
the yield drops, the cost of capital
generally lowers everywhere and credit
flows more easily. But since the yield
recovered so quickly, what does that
signal for global liquidity?
>> It signals that while there was an
immediate liquidity boost from the
flight to safety, the underlying
uncertainty is still very high.
>> So it's fragile.
>> Very. If confidence in US assets erodess
or if yields climb unexpectedly, it
tightens liquidity and tighter US yields
tend to strengthen the dollar, which is
particularly punishing for emerging
markets. That strong dollar effect
really shows the interconnected pain,
doesn't it?
>> Absolutely. If we think back to the
April crash, the impact was severe.
International indices plunged between 4%
and 11%. >> Wow.
>> Wow.
>> So, the resilience of Treasury liquidity
in late 2025 is a crucial buffer, and
that's largely due to the Fed's efforts
to maintain stable funding markets.
>> Okay. Now, let's bring it right down to
the micro level.
>> The conservative investor, the person
holding cash in a money market account,
>> right? money market accounts or MMAs,
they function as a very safe haven.
They're tied directly to short-term
instruments like treasury bills.
>> So on November 18th itself, nothing
really changed for them.
>> Correct. The actual underlying rates
were very stable. The Fed funds rate was
steady at 3.88%.
The 3-month T bill was holding at 3.80%.
So if you checked your MMA rate that
day, you wouldn't have seen a
difference. But if that big long-term
yield collapse had happened.
>> Exactly. A persistent yield fall would
ultimately compress high yield MMA
annual percentage yields. Our sources
suggest experts estimate average yields
could compress by 5 to 10 basis points
over the following weeks.
>> Which might not sound like a lot.
>> It might not, but on large cash holdings
that translates into measurably reduced
returns for savers. The bottom line is
bond volatility is a benefit to
borrowers who get cheaper funding, but
it puts that subtle pressure on the most
conservative returns.
>> So what does this all mean? Let's zoom
out and look at the market's overall disposition.
disposition.
>> Well, the first place to look is the
fear gauge. The VIX, the volatility
index rose 7% on the day.
>> And for anyone less familiar, the VIX
basically measures what the market
expects for near-term volatility, right?
Using options prices.
>> That's right. So when the VIX is up,
traders are buying insurance against
market swings.
>> A 7% jump means anxiety is definitely elevated.
elevated.
>> And when you combine that anxiety with
the specific economic headwinds we saw
from Home Depot's housing slowdown, you
have a strong indication that markets
are pricing in a potential economic
slowdown ahead.
>> So we have panic in stocks, fear
indicators flashing, but the bond market
held stable. That seems to be the key
counterpoint here. it is that stability
suggests that investors aren't preparing
for a severe immediate crisis. Instead,
they seem to be pricing in a measured
path toward uh moderated Fed easing
sometime down the line.
>> So, the central debate is still all
about AI
>> completely. Is November 18th just a
healthy correction in an overheated
sector, or was it the prologue to a
significant bubble bursting? That's the question.
question.
>> And as we look forward, what's the one
data point you should be watching for
the next signal?
>> It's earnings. The market is hanging on
every word related to upcoming earnings,
particularly Nvidia's.
>> So, a strong report could calm things down.
down.
>> A strong report that validates the
massive investment in AI could quickly
stabilize sentiment, but a disappointing
one. Well, that would validate all those
tail risk fairs we talked about.
>> So, this deep dive into November 18th,
2025, it really shows a perfect picture
of modern market complexity.
>> It really does. You had deep equity
skepticism all fueled by these
concentrated AI valuation fears leading
to major tech losses.
>> But this was directly contrasted with
the Treasury market that showed
remarkable resilience. It stabilized its
yield curve. This dynamic tells us that
despite the stock turmoil, bond
investors are anticipating a measured
expert response from the Fed, not a
panic-driven one.
>> And that measurement matters immensely.
We saw today that those subtle yield
swings, even when corrected within a
single day, place real pressure on
global credit and crucially on the
returns for the most conservative savers.
savers.
>> So, you really have to watch both
valuation warnings and yield swings.
>> You do to get the full picture of
economic health and the sources reveal
that trade uncertainties while not the
main driver that day are still
influencing the underlying sentiment.
>> So, a final thought for you to mle over.
Cons this. If AI valuation worries
continue to dominate the stock
conversation, how much political
pressure will rise to influence the
Federal Reserve's gradual bond
purchases? Those purchases that are only
meant for reserve management.
>> That political pressure could complicate
their efforts to maintain smooth liquidity
liquidity
>> and force them into sending signals they
never intended to send. That's the
complex policy challenge that's going to
define the markets moving into the end
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