Weekly Bubble Risk Monitoring Report

 Overview

Triggered by renewed U.S.–China trade tensions (tariff hike threats up to 100% and tighter export controls), tech stocks plunged and volatility spiked on Friday, October 10. The VIX rose sharply, and the put-call ratio shifted toward risk aversion.
However, the credit market (HY spread below 3%) remains within the “normal range,” and MMF balances are still near record highs. As the earnings season begins, investors’ attention turns to the financial sector’s results and forward guidance.
TSMC’s Q3 revenue exceeded expectations, and NVIDIA’s August earnings confirmed continued growth with a strong Q3 outlook.
Overall, market psychology cooled due to a localized shock, but credit and liquidity fundamentals remain intact.

1. Macro-Financial Environment

  • U.S. 10-year Treasury yield: Fell to the low-4% range on Oct 10 amid a flight to safety. The partial U.S. government shutdown entered day 10, adding uncertainty.

  • VIX: Jumped from 16.4 → 21.7 (Oct 9 → Oct 10).

  • HY OAS: 2.76 → 2.95% (Oct 6 → Oct 9). Around 3% marks the boundary between “normal” and “mild stress.”
    Rating: Caution
    Summary: Falling yields with rising volatility indicate risk aversion, though credit stress has not reached disorderly levels.

2. Capital Flow & Credit Conditions

  • MMF balances: $7.39 trillion (as of Oct 9 week), near record highs.

  • Margin debt: $1.02 trillion (July, record level). Leverage remains elevated.
    Rating: Caution
    Summary: High cash buffers provide a cushion, but elevated leverage amplifies downside risk.

3. Corporate Earnings & Fundamentals

  • S&P 500 Q3 EPS growth estimate: +8%. Historical beats suggest potential double-digit growth. Upcoming financial earnings will gauge macro momentum.

  • NVIDIA (Q2 FY26): Revenue $46.7 B (+56% YoY); Q3 guidance ≈ $54 B. Data-center segment +5% QoQ.

  • TSMC (Sept sales NT$ 331 B +31% YoY; Q3 NT$ 989.9 B +30% YoY) — above guidance upper range.
    Rating: Stable
    Summary: AI-infrastructure leaders continue to post strong growth. Only slight caution on wording around CapEx guidance.

4. Sector Valuation Landscape

  • Philadelphia Semiconductor Index (SOX): −6.3% on Oct 10 after an extended rally.

  • Mega-cap tech concentration persists, but short-term “risk-off” rotation has appeared.
    Rating: Caution
    Summary: Valuations remain stretched; drawdowns could be sharp during shocks.

5. Real-Economy & Supply–Demand Data

  • Global Manufacturing PMI (Sept): ≈ 50.8 (vs 50.9 previous) — steady plateau.

  • Global semiconductor sales (Aug): $64.9 B (+21.7% YoY) — strong momentum.

  • HBM/DRAM pricing: Still rising amid tight supply; Q4 uptrend expected.
    Rating: Stable
    Summary: AI-related supply chains remain solid; rising component prices could pressure margins ahead.

6. Information & Sentiment (Market Psychology)

  • VIX: 21.7 (Oct 10), +31.8% vs previous day.

  • Put-Call Ratio (CBOE Equity): 0.69 (Oct 10), signaling short-term risk aversion.

  • Fear & Greed Index: 29 (“Fear,” Oct 10).

  • AAII Sentiment: Bullish 45.9% (as of Oct 9) — still optimistic, likely to ease after Friday’s drop.

  • Bull–Bear Spread: +10.2 points (Oct 9).
    Rating: Caution
    Summary: Fear gauges (VIX, F&G) spiked, but individual investor sentiment remains relatively bullish — a psychological divergence.

7. Meta Narrative (Expectations & Storyline)

  • U.S.–China trade risk now directly affects the AI supply chain and tech regulation, dampening sentiment. At the same time, TSMC and memory leaders’ strong results reinforce the narrative that “the AI infrastructure cycle remains intact.”
    Rating: Caution
    Summary: The AI-growth story persists, but geopolitical headlines make it fragile and volatile.

Overall Assessment
🟡 Caution (Local Overheating → Psychological Cooling)
Reason: A surge in VIX and put-call ratio shows rising short-term fear. However, HY spreads and MMF balances remain stable, and fundamentals (NVIDIA and TSMC) are solid. Current conditions still fall within a “correction phase,” not a systemic unraveling.

Key Observations This Week

  • Monitor U.S. bank earnings for credit quality, loan demand, and deposit costs — a critical read on financial tightness.

  • Watch U.S.–China headlines on tariffs and export controls along with VIX and PCR movement.

  • AI supply chain focus: TSMC earnings (Oct 16) and management comments on HBM pricing.

Upcoming Indicators Next Week

  • Major corporate earnings (financial & semiconductor) / forward guidance

  • VIX, Fear & Greed, AAII — monitor for reversal or stabilization

  • PMI final readings / Semiconductor Industry Association monthly data update

Tags
Economic News / Market Observation / AI Bubble / Investment Analysis / Macro Trends

Note
This report was prepared with the assistance of ChatGPT (GPT-5).
All information is based on publicly available data believed to be reliable; however, due to data lags or interpretation differences, some inaccuracies or errors may remain.
Readers should exercise independent judgment and bear full responsibility for their own investment decisions.

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