Markets brace for the Archegos test

Has the stock market gotten ahead of itself? That's the question traders are asking heading into Monday's session, in the wake of a dramatic fall-off in a handful of stocks owned by a hedge fund manager named Bill Hwang.

Driving the news: Hwang was making highly leveraged multi-billion-dollar bets on companies including U.S. TV networks ViacomCBS and Discovery. When those stocks started to fall, Hwang's fund, Archegos, was forced to liquidate the positions at any price, and both companies ended up losing about half their value as a result.

The big picture: This week's trading is likely to give an indication of how many high-flying stocks have been bid up by debt-fueled speculators like Hwang.

• If the strength of the market reflects robust underlying demand, then ViacomCBS and Discovery are likely to bounce back up, and other stocks will be largely unaffected by the turmoil at Archegos.
• If stock prices are the result of a speculative bubble, however, the implosion of Archegos is exactly the kind of catalyst that could spark spectacular drops in many other stocks that have seen impressive run-ups in recent months.