Markets are now very unstable because of rising worries about bad loans, instability in the banking sector, and rising trade tensions between the US and China. The CNN Fear and Greed Index has dropped to 23, which is the lowest point it has been since April 2025. This means that investors are trying to get out of risky positions as quickly as possible.
The loan loss crisis is getting worse for regional banks
A lot of bad loans are piling up in the banking sector, which is making investors nervous. Zions Bancorp and Western Alliance Bancorp, two regional banks, lost the most money in one day in more than six months. They revealed that they had made loans that could be fraudulent. Zions lost $50 million on a loan, and Western Alliance sued a borrower they thought was committing fraud.
Jefferies Financial Group, an investment bank, is now a major concern because it has at least $45 million in exposure to First Brands. The company, an auto parts supplier, went bankrupt last month. Jefferies stock has dropped 27% in three weeks. Investors wonder what other hidden risks are in the financial system.
CEO of JPMorgan Warns of Hidden Risks in the Market
Jamie Dimon, the CEO of JPMorgan Chase, gave a very clear warning this week. He used the “cockroach theory” to describe what was happening. Dimon told analysts on a call on Tuesday that “when you see one cockroach, there are probably more.” This made him think about possible systemic risks that could happen again like they did during the Great Financial Crisis. Last month, the failure of subprime auto lender Tricolor brought attention to the problems on Main Street, where more and more Americans are falling behind on car loans.
Tensions in US-China Trade Make the market even more chaotic
Donald Trump scared people about a trade war again when he said that China would face huge tariffs starting on November 1. This was because of Beijing’s strict export controls on important rare earth minerals. At this sensitive time, Treasury Secretary Scott Bessent is set to talk to China’s Vice Premier He Lifeng about the ongoing trade talks. Trump later said that the US wanted to “help China, not hurt it,” but markets are still worried.
Global Markets Follow Wall Street Down
European stocks fell on Friday. The DAX in Germany fell 2%, the CAC 40 in France fell 0.7%, and the FTSE 100 in the UK fell 1.5%. The most selling was in banking stocks. Deutsche Bank dropped 6.4%, Barclays dropped 5.2%, and BNP Paribas dropped 3.9%. Asian markets also fell sharply. The Hang Seng Index in Hong Kong fell 2.5%, the Shanghai Composite fell 2%, and the Nikkei 225 in Japan fell 1.4%.
Safe-Haven Assets Hit All-Time Highs
As fear spreads through the markets, investors are running away to safety. Gold rose by 0.7% to $4,330, setting another record high. Silver, on the other hand, hit its first record high in 40 years. Investors looked for government-backed debt, which caused US Treasury bond yields to drop below 4%. This level was not seen since the tariff crisis in April. Bitcoin fell to $106,000, its lowest point since July. Oil fell below $57 for the first time since 2021 because people were worried about the economy.
Market Volatility Reaches April Levels
The VIX volatility index, which Wall Street uses to measure fear, jumped 23% on Thursday and 5% on Friday, reaching its highest level since Trump announced his huge tariff plan in April. Dow futures were down 100 points, S&P 500 futures were down 0.4%, and Nasdaq futures were down 0.6% on Friday morning. This meant that US stock futures were pointing to more pain ahead.
The government downplays worries about banks
In a Fox Business interview on Friday, Kevin Hassett, head of the National Economic Council, tried to calm people’s nerves by saying that the U.S. banking sector has “very ample reserves.” He said that the Biden administration was to blame for “messes” like the collapse of the Silicon Valley Bank in 2023. He also said that the current team, which includes Federal Reserve Vice Chair Miki Bowman and Treasury Secretary Scott Bessent, can stay “way, way, way ahead of the curve.”
What Investors Should Know
The S&P 500 is still less than 2% below its all-time high. However, investors are on edge because of the constant stream of bad news. If banks and big private credit companies lose more money, they may not be able to lend as much to healthy consumers, small businesses, and corporations. This could be bad for the economy as a whole. The Great Financial Crisis showed us that problems on Main Street often start in less well-known parts of Wall Street.
