What’s really behind this bout of market mayhem? The truth is no one really knows

On Oct. 19, 1987, Black Monday, stock prices plunged, with the Dow Jones industrial average falling 22.6% in a day. Many commentators rushed to explain what triggered the crash — a response to some political event, some piece of economic data or whatever.

I’m dating myself here, but I often think about Shiller’s work when markets go wild, as they have the past few days. Still, let’s ask the question: Did recession fears set off this market plunge? The more you look at the facts, in particular which prices plunged, the less sense this story makes. Back to U.S. stocks: The biggest loser among major players was Nvidia, which makes chips used in artificial intelligence . AI-related companies and their stocks have been on a huge run, but there’s a growing sense, at least as far as I can tell, that they have been overhyped. As one source put it, “Concerns about it being a bubble arise from the hype surrounding unproven AI applications and massive investments driving unrealistic expectations.

One is gold, often regarded as a safe place to park your wealth. That role is way overstated, but in this case, at least, the metal lived up to its reputation, not losing much value in the crash. But I include it mainly as a point of comparison for the other asset, bitcoin, whose price plunged more or less in line with tech stocks.

So what caused the stock sell-off? I don’t know. What I do know is that nobody else knows, either. And it probably doesn’t matter much, unless this sell-off has major effects on the real economy.U.S. economic growth in the near future probably won’t be as robust as it was after Black Monday, since there’s a lot of evidence that the economy is slowing down for reasons unrelated to the stock market. But the crazy market action of the past few days was probably sound and fury, signifying not much.

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