Navigating the 'Black Swan' Event

You probably keep hearing the term “black swan” in the media. No, it is not a reference to the 2010 Natalie Portman drama film! In contrast, a black swan event is an unexpected, hard-to-predict, and rare event that can significantly impact financial markets, economies, and societies. So, what exactly is going on?

Last month, stock prices were jolted by the preemptive concern that an impending black swan event could occur and lead to some major restructuring in the AI business. A Chinese AI firm, DeepSeek, developed a competitive AI model that performs up to par with the rest of the programs at just a fraction of the cost, resulting in a lot of pressure on AI stocks and, therefore, major market fluctuations.

Many S&P 500 companies have invested heavily in AI, causing a stir in the ever-volatile market. Remember, market fluctuations are normal. We see 3% pullbacks over 7 times a year, and stocks retreat 5% almost 4 times yearly. As more news hits, we are expecting stock prices to adjust, as traders often inherit a “risk-off” position during such events.

Just as we do with every cultural and life event, we build portfolios to withstand market volatility. For now, we will allow the market to continue to process the news and see if this is truly a “black swan” event or just another development in the world of AI.

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