There appear to be three key drivers of the developing rout in share and cryptocurrency markets: the US Federal Reserve Board, Donald Trump’s tariffs and the massive investments being poured into artificial intelligence.

It’s not a coincidence that the downturn in the markets started in late October, just after the Fed’s most recent meeting of its Open Market Committee, which sets US monetary policy. The committee cut the Fed’s policy rate by 25 basis points on October 29.

President Donald Trump and Federal Reserve chairman Jerome Powell have both helped make the markets nervous. Credit: AP

Ahead of that meeting, futures markets were pricing in a 90 per cent probability of another cut in December. In the aftermath of the meeting and chairman Jerome Powell’s press conference, the odds on a December cut have fallen to 40 per cent.

What did Powell say to upend sentiment in risk markets?

“At this meeting, there were strongly differing views about how to proceed. A further reduction in the policy rate at the December meeting is not a foregone conclusion,” he warned.

“Far from it. Policy is not on a preset course. And the takeaway from that is that we haven’t made a decision about December.” Since then, a number of senior Fed officials have also cast doubt on a December rate cut.

It hasn’t helped the share and crypto markets, which are highly sensitive to interest rates, that Trump’s reciprocal tariffs are under a cloud after a less-than-favourable hearing of oral arguments for and against them before the US Supreme Court a fortnight ago.

If the tariffs were shot down by the court, the administration might have to refund much of the $US195 billion ($300 billion) or so of tariff revenue collected so far this year.

Even if it weren’t forced to disgorge that revenue, the (albeit relatively modest) impact of tariff revenues on US government deficits and debt would disappear,........

© The Sydney Morning Herald