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The scale of the sell-off on the US stock market resembles a panic search for liquidity

April 7, 2025 (Investorideas.com Newswire) Investorideas.com, rated as a top 100 investment website for investment issues market commentary from Hani Abuagla Senior Market Analyst at XTB MENA.

The scale of the sell-off on the US stock market is reminiscent of the panic-seeking for liquidity that we last saw during the early days of the pandemic in March 2020. To put it colloquially, many investment funds in the US and around the world were loaded "under the cap", all the while maintaining significant growth resulting from the artificial intelligence boom. But now there is a need for liquidity, and all fund managers are selling off all of their most liquid assets. That is why we are also seeing declines in gold prices, although not as rapidly as in 2020.

It is worth noting that we are currently seeing a massive increase in the prices of the VIX, or fear index. Currently, it reaches almost 60 points, while it is indicated that the level of 30 indicates increased levels of volatility. It is worth remembering that during the pandemic, the VIX reached a maximum of 80 points, while during the sell-off in 2008 it was almost 90 points. Therefore, it is not yet possible to talk about an extreme oversold market, although in the past most short-term declines ended when the VIX went above 50 points.

The current declines from the peak in the case of the S&P 500 and Nasdaq 100 indexes are already exceeding over 20%, while since July 2, they have been falling in the range of about 15%. If the indices do not return above the 20% decline limit in the next 2-3 weeks, it could mean a longer period of declines. Nevertheless, it is worth remembering that currently any liquidity supply from the government or the Fed or positive information on the trade war from Trump could change the situation on the market in just a few hours.

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