--- title: "Was Last Friday's Plunge Just a Rehearsal? Goldman Sachs and Barclays Issue Warnings: AI Trade Crowding Has Reached Extreme Levels" type: "News" locale: "en" url: "https://longbridge.com/en/news/289190031.md" description: "Goldman Sachs and Barclays warn that crowding in AI trades has hit historic extremes, increasing the structural fragility of the U.S. stock market. Although momentum stocks rebounded after last Friday's sharp decline, institutions view it as a \"Dead Cat Bounce\" and expect market weakness to persist until October. High positions held by CTA and volatility control funds could trigger large-scale deleveraging if price volatility continues, exacerbating downside risks" datetime: "2026-06-09T12:30:06.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/289190031.md) - [en](https://longbridge.com/en/news/289190031.md) - [zh-HK](https://longbridge.com/zh-HK/news/289190031.md) --- # Was Last Friday's Plunge Just a Rehearsal? Goldman Sachs and Barclays Issue Warnings: AI Trade Crowding Has Reached Extreme Levels Extreme crowding in AI trades is pushing the stock market toward a fragile tipping point. Last Friday, U.S. momentum stocks suffered a heavy setback, with the iShares MSCI USA Momentum Factor ETF falling 6% in a single day, marking its largest one-day drop since the sell-off in April 2025; the Nasdaq 100 Index plummeted 4.8% as investors rushed to sell off large-cap tech stocks and move into defensive assets. Trading desks at Goldman Sachs and Barclays promptly issued warnings, stating that this plunge should not be seen as an isolated incident, as the market's structural fragility has significantly increased. U.S. stocks staged a slight rebound on Monday, with the S&P 500 rising 0.3% and the Nasdaq 100 gaining 1.6%. U.S. stock futures also pointed to further gains before Tuesday's open. However, many institutions remain skeptical about the sustainability of the rebound. As Wall Street News mentioned earlier, Mark Newton, Head of Technical Strategy at independent U.S. research firm Fundstrat, stated in a post-market report on Monday that the day's rally resembled a "Dead Cat Bounce" rather than the establishment of a trend bottom. He expects the market to remain weak at least until late July, with downside risks potentially extending into October. ## Momentum Trade Crowding Hits Historic Extremes, Reversal Risk Surges Data from Goldman Sachs shows that crowding on the long side of momentum trading strategies has reached historic highs, while the short side remains underweight. This structural imbalance means that once uncertainty arises regarding the prospects of AI trades, the Federal Reserve's interest rate path, or a resurgence in inflation, the intensity of any reversal will far exceed what index-level volatility suggests. "All these factors combine to create an environment where the destructive power of factor unwinding could be much more severe than what index volatility presents," Goldman Sachs traders, including Lee Coppersmith, wrote in a note to clients. Positions held by systematic investors also constitute a potential source of pressure. Commodity Trading Advisors (CTAs) and volatility control strategies have increased their equity exposure to the highest levels since February. If price volatility persists, these funds will face pressure to forcibly reduce positions. ## Volatility Control Funds May Trigger a New Round of De-risking Alexander Altmann, Global Equity Tactical Strategist at Barclays, warned that last Friday's plunge could force volatility control funds to cut their U.S. equity positions by approximately 14 percentage points, marking the largest single-day de-risking move since February 6. Altmann pointed out that some de-risking may have already been completed on Friday, but such selling often has a short-term lag effect, which could continue to suppress the market early this week. "When market movements become extreme, the impact of this mechanism on short-term price trends can be quite significant," he said. Altmann described the current market landscape as an "exceptionally asymmetric structure," believing that momentum trades "face more intense liquidation risks once positions begin to reverse." ## JPMorgan Downgrades Short-Term Rating, Warns of Continued Selling Pressure on Tech Stocks JPMorgan's trading desk downgraded its near-term rating for U.S. stocks from bullish to "tactically cautious" on Monday, warning that the market might continue to oscillate in the short term as investors may continue to reduce holdings in tech stocks that have surged recently. Andrew Tyler, Head of Global Market Intelligence at JPMorgan, stated, "We do believe in buying on dips," but emphasized that given the multiple immediate correction risks facing the market, "it is more reasonable to build positions in tranches this week and next." He cited risk factors including bond market volatility, position unwinding pressure, a potential ebbing of the AI trade, and the continuously expanding scale of equity issuance. ## AI Financing Boom Brings Supply Shock, Liquidity May Be Diverted The market currently faces a new structural pressure: a large number of companies seeking funding for AI expansion plans are preparing to list and raise capital in a concentrated manner, creating a scale of equity supply rarely seen in recent history. The arrival of this supply flood coincides with increasingly extreme market positions, leading some strategists to worry that liquidity for existing stocks may be diverted—especially against the backdrop of sustained high interest rates and slowing economic growth, where this pressure will be more pronounced. In summary, the high crowding of AI trades, the passive de-risking pressure from systematic funds, the continued selling risk in tech stocks, and the impending equity supply shock collectively form a rather unfavorable short-term combination for the market. Last Friday's plunge may have been merely the prelude to this larger adjustment. Risk Disclosure and Disclaimer The market involves risks, and investment requires caution. This article does not constitute personal investment advice, nor does it take into account the specific investment objectives, financial status, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. 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