Which tail is wagging the market dog?

What a week for the markets. Global stocks posted their worst week since April, as the heat surrounding AI stocks began to burn off.

On Thursday, the Nasdaq saw its wildest swing from green to red since President Donald Trump’s “Emancipation Day” shock stocks in April. It resonated around the world, with Stokes 600 Touching its lowest level in one month in Germany Dax Stocks fell to levels not seen since June, and Asian shares closed deep in the red during the week.

What does this volatile week for stocks and other asset classes mean for the next trading week?

Much of the discussion around the CNBC International desk this week centered on what prompted investors to be more cautious about some of the year’s most popular stocks, as well as about certain asset classes that have been on their way to gangbusters since the Trump administration returned to the White House.

In short, the market wanted to know – which tail is wagging the dog?

Robert Nickelsburg | Getty Images

Tail 1: AI anxiety

Tail 2: Encryption concerns

It is “revenge of the old economy.” That’s the view of Jeff Currie, chief strategy officer at Carlyle, who told CNBC’s Juliana Tatelbaum in London that there’s a link between AI jitters and the big moves seen in cryptocurrency markets this week.

“People who own big tech companies also own cryptocurrencies. They sell cryptocurrencies to finance losses in big tech companies, and then it becomes a violent downward spiral,” he said.

Cryptocurrency is an early adopter and risk-taker asset: Jeff Currie of Carlyle

Tail 3: lagged data

The delayed data – due to the US lockdown – did little to provide clarity on the Fed’s next move, after a rise in the unemployment rate in September and other downward revisions spooked investors.

The latest FOMC minutes also indicate a preference to skip any move in December, with Standard Chartered’s Stephen Englander writing in a recent note: “We have shifted the December cut to the first quarter, most likely in January.” He added, “hawkish sentiments seem more intent than dovish ones.”

Next week, we expect to hear from a variety of ECB voices, including ECB President Christine Lagarde, Executive Board Member Frank Elderson and Governing Council Member Piero Cipollone, who will take the stage at various events in Europe. On Friday, Lagarde called on Europe to move from “mere flexibility to being truly strong.”

Tail 4: Financial sentiment

All the volatility in the overall stock market may have provided some air cover for UK Chancellor Rachel Reeves as she counts down the final days to Wednesday’s Budget announcement. Billed as the financial event of the year, there have been twists and turns so far in the bond market. Ian King will be live from Westminster with all the details, and in the meantime, the CNBC UK Exchange newsletter sets out how Reeves plans to tackle the £30bn financial hole.

Britain’s Reeves paints a confusing picture as pressure mounts from all sides

The easy answer is that it’s probably all the tails wagging the market’s dogs, but with this many market forces at play, perhaps the safest bet is that volatility looks set to continue in next week’s trading.