US Stock Market Experiences 'Bloodbath' in Crowded Trades

In July, the US stock market appeared stable on the surface but underneath experienced a 'shocking bloodbath of positions.' The most crowded AI and momentum trades suffered a heavy blow from deleveraging.

The S&P 500 held its ground with a volatility range of only 3.5% in July, less than 2% from its peak, while the equal-weighted S&P, low-volatility S&P, and the S&P 500 excluding AI all reached historical highs this week.

Tony Pasquariello, head of Goldman Sachs' hedge fund business, noted that 'a heavy hammer has smashed through consensus positions over the past month,' indicating a cooling down in high-speed trading.

The average daily volatility of the S&P 500 was less than 1%, but Goldman Sachs' flagship momentum basket had an average daily volatility close to 10%.