Are we out of the woods when it comes to worrying about a big stock sell-off? Are we on the path to a brighter environment for stock prices?

The big story for our stocks portfolio and inevitably our super was the latest company earnings from Nvidia, the world’s leading tech company spearheading the investment in Artificial Intelligence, headed up by a black leather wearing bikers jacket with the cool name of Jensen Huang. Before yesterday, the Wall Street feeling was that if this company reported better than expected then stocks should rise.

Our stock market had fallen around 7%, we waited with bated breath. When key shares influencers saw a 62% increase in revenue to $57 billion for the last quarter and a forecast of $63 billion for the next, it should’ve eased fears about an AI bubble with little chance of decent returns after huge investments by Nvidia, Apple, Amazon, Alphabet, Meta, Microsoft, Tesla and other big tech companies such as Oracle.

Players especially liked Jensen telling the awaiting market that the sales of its Blackwell chips were “off the charts”. And yep, people on the Australian market bought it and our S&P/ASX 200 index spiked 104.80 points (or a big 1.24%). But the chart below shows how negative the stock market has been for the past month, which is still down just shy of 6%!

S&P/ASX 200

Interestingly, while the Dow Jones index on Wall Street was only down 1.3%, the Nasdaq was off 2.76%, which indicates our market looks like we’ve had an overreaction to this tech sell-off in the US.

It also means our market is dropping not just for the US tech sell-off, which is linked to possibly crazy AI bubble investing that also has hit our best tech companies. Other factors are at play, so let me list them below:

1. The RBA doesn’t think we need another interest rate cut until mid-2026 if we’re lucky.
2. Over the past month the CBA share price has dropped 11.85%. This is our biggest and most important stock in the S&P/ASX 200.
3. JB Hi-Fi is down 16.63%, Macquarie is off 14.77%, NAB is 6.26% and the other banks are lower too.
4. Our miners have had to contend with a slower growing China which is playing hardball on things like the price of iron ore with BHP and so BHP’s share price is off 5.46% over the month.
5. And there have been concerns that the Fed won’t give the US the December interest rate cut at a time when the shutdown stopped giving us economic data on the world’s biggest economy. There’s also a chance that the Supreme Court will call President Trump’s tariffs illegal, which would be a temporary problem for Wall Street.

Interestingly, the Yanks got the September jobs number overnight and 119,000 jobs were created, which was more than expected and doesn’t help the case for those arguing the US economy needs a rate cut ASAP.

While this good/bad news has meant the Nvidia result has been cancelled out by key US stock players overnight, the strange people on the New York Stock Exchange are ignoring the news that the US economy is stronger than expected and the AI investment looks like it’s generating good revenue and profits.

This also makes the case that shares in these big tech companies are in a bubble, which makes me think that while we might not be out of the woods when it comes to worrying about a big stock sell-off, we look like we’re on the path to a brighter environment for stock prices.

Here's one last point you should be aware of. The second year of a US presidency is usually the worst for stocks and has a history of a 17% drawdown! While this is based on the average performance of stocks in year two of a new president, these numbers would be based on a ‘normal’ US president. However, you might’ve noticed that the current guy in the White House is abnormal and is promising his ‘One Big Beautiful Bill’ with tax cuts. And then there’s financial deregulation that could easily make year two for Donald Trump’s presidency an unusual one where stocks actually rise rather than fall.

It could mean I will worry about 2027 being the significant sell-off year. All I can suggest you do is — watch this space! For now, I won’t be surprised if there’s a Santa Claus rally running into the festive season because the world knows that the Yanks are famous for putting on a great Christmas!