$8.5 trillion wiped out from global stock markets but are recession fears premature?

The numbers flashing on trading screens on Aug 5 were shocking even to market veterans. In Tokyo, the Nikkei 225 was down 12 per cent. In Seoul, the Kospi index sank 9pc. When the opening bell rang in New York, the Nasdaq plunged 6pc in seconds. Cryptocurrencies sank; the VIX, a gauge of stock market volatility, skyrocketed; and investors piled into Treasury bonds, the safest asset of them all. Whether the wild gyrations on Aug 5 mark the final bang of a global sell-off that started to build last week, or signal the beginning of a protracted slump, is impossible to know. But one thing is clear: the pillars that had underpinned financial-market gains for years — a series of key assumptions that investors across the world were banking on — have been shaken. They look, in hindsight, a bit naive: the US economy is unstoppable; artificial intelligence (AI) will quickly revolutionise business everywhere; Japan will never hike interest rates – or not enough to really matter.