So, what was it that caused the sell-off in risky assets and sharp increase in volatility? The Fed? The Bank of Japan? The end of an AI bubble? A soft employment number? The yen carry trade unwinding? All of the above? Something else entirely? Who knows? The truth is that financial markets are a complex, chaotic and deeply intertwined beast, which makes both predictions and explanations impossibly difficult. Not that this stops us attempting both. For most investors a rationalisation of events doesn’t even matter – markets are volatile; sometimes uncomfortable and inexplicable things occur. What’s more important is what happens to us during bouts of market turbulence. This is where the real damage is done.
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