On Monday, losses in Ark Innovation ETF (ARKK), Bitcoin, meme and technology stocks hit risky assets that rose $7 trillion this quarter. The s & p 500 fell more than 2 per cent, its worst two-day slump since mid-June, as a sell-off in 10-year Treasuries pushed yields above 3 per cent for the first time in a month, volatility soared and the Chicago board options exchange VIX index approached 24, its highest level in three weeks.

The Fed's aggressive rate hike is a direct trigger, and Powell is widely expected to reiterate the Fed's hawkish expectations in a few days' time. As analysts began to advise investors to favour cash, the correction in risky assets slightly cooled fears that the stock market rally would prompt the Fed to act more aggressively. David Spika, president and chief investment officer of GuideStone, said: "good market risk sentiment led to a sharp increase in speculative assets from mid-June to the end of July, but that does not mean it has reasonable value, but more means that money is chasing the trend."

ARKK drop

Ms Mu's ARKK has seen outflows for five consecutive trading days, including 11 of the past 12 trading days. So far this year, the ETF has seen monthly inflows except in June, although its market value has fallen by nearly half since it began in 2022, with the fund plunging 2.4 per cent on Monday.

Cryptocurrency selling

Digital assets also tumbled as investors lifted bets that the Fed might raise interest rates less than expected. Bitcoin broke through the $25000 mark last week, but has since fallen to $21000. Meanwhile, the cryptocurrency index, which covers the top 100 by market capitalization, fell 3.1 per cent on Monday after falling nearly 12 per cent last week.

Meme shares decline

Shares of 3B BBBY.US fell 16 per cent after reports that some suppliers began to restrict or stop shipments after the company defaulted on payments. The pessimism also spread to other meme stocks, with GameStop (GME.US) down 5.5 per cent on Monday and AMC.US (AMC cinema) down 6.4 per cent.

Technology stocks have been hit hard

Shares in Goldman Sachs Group's basket of non-profit technology companies fell 2.6% on Monday and are now at their lowest level since Aug. 2. When investors expect higher interest rates and inflation to erode future earnings, the share prices of technology companies that are highly valued based on future profit expectations are at risk of falling.

IPO slows down

The Fed's aggressive monetary policy has hit newly listed companies particularly hard. Renaissance IPO ETF (IPO) fell 8.9% last week, the biggest weekly decline since May. The fund has fallen by about 44 per cent since the start of the year.

The collapse in speculative assets may prove correct for bears, who have been warning for six weeks that the stock market rally cannot be sustained and have been highlighting soaring energy prices in Europe and the Fed's possible overly aggressive tightening.

There was a sell-off in global bond markets last week and European energy and electricity prices continued to soar, amid fears that these factors would keep inflation high throughout the winter. Michael O'rourke, chief market strategist at Jonestrading, said, "although the market is in a safe haven, concerns about inflation are driving bond selling and pushing yields higher. Therefore, long-term growth stocks face greater pressure. "