--- title: "\"Aftershocks Are Inevitable After a Magnitude 7 Earthquake\"? Quant Funds Suffer Another Heavy Blow on Wednesday Following July's AI Losses" type: "News" locale: "en" url: "https://longbridge.com/en/news/296549186.md" description: "Goldman Sachs data shows that systematic long-short funds fell 1.4% in a single day on Wednesday, while Morgan Stanley's \"pure momentum\" index dropped more than 4% in a day for the first time in five years. The triggers were the U.S. Treasury's expanded bond purchases and the surge in Moderna's stock price. Industry insiders used the metaphor \"aftershocks are inevitable after a magnitude 7 earthquake\" to describe the current predicament, where synchronized deleveraging by various parties to reduce market exposure has exacerbated market volatility, creating a negative feedback loop" datetime: "2026-08-21T00:34:10.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/296549186.md) - [en](https://longbridge.com/en/news/296549186.md) - [zh-HK](https://longbridge.com/zh-HK/news/296549186.md) generator: "portal-rs" --- # "Aftershocks Are Inevitable After a Magnitude 7 Earthquake"? Quant Funds Suffer Another Heavy Blow on Wednesday Following July's AI Losses Following the July sell-off in AI-related stocks that severely impacted Wall Street, quant hedge funds suffered another heavy blow on Wednesday, marking their worst single-day performance in over two years. On August 20, according to a report by the UK's Financial Times, an internal Goldman Sachs memo showed that as of 1 p.m. ET on Wednesday, systematic long-short hedge funds had fallen 1.4% for the day, their worst single-day performance in more than two years. The deviation of Goldman Sachs' "Global Momentum" index has far exceeded its historical normal range. Triggers for the day's market volatility included: **the U.S. Treasury announcing it would "at least double" its purchases of long-term Treasury bonds to stabilize the bond market, and vaccine manufacturer Moderna's stock price nearly tripling in a single day after releasing positive trial results for an experimental skin cancer therapy.** The report stated that this shock further exacerbated the difficulties faced by "momentum trading" strategies, which have been under pressure since the AI stock sell-off began several weeks ago, **also reigniting market doubts about whether quant funds can operate stably in a high-volatility environment.** ## Momentum Strategies Suffer Unusual Shock Losses for quant funds this time were concentrated in funds with significant exposure to the "momentum factor"—strategies that systematically buy rising stocks and sell falling ones. According to a Morgan Stanley client memo seen by the Financial Times, this was **the first time in at least five years that the bank observed its "pure momentum" index fall more than 4% in a single day**, even as the S&P 500 Index closed higher for the day. A portfolio manager at a large asset management firm stated that **"it doesn't take many individual stocks like Moderna"** to make risk managers **"somewhat panicked,"** implying that sharp volatility in a single stock can cause a chain reaction impacting the entire quantitative strategy system. One hedge fund manager bluntly stated: > "Volatility is extremely abnormal, and option market makers are taking hits from all sides. The market rotates every day; what makes money today is almost certain to fall tomorrow." An executive at a top quant hedge fund used an earthquake analogy to explain the current market's underlying logic: > "If a magnitude 7 earthquake occurs, there will inevitably be aftershocks in the following days. It won't go directly to zero, but market participants are reducing their market exposure." This statement reveals the core dilemma facing quant funds currently: **in an environment of extreme volatility, synchronized deleveraging and risk compression by various parties have instead exacerbated the market's non-linear volatility, forming a self-reinforcing negative feedback loop.** **Quant funds have experienced similar difficult periods before.** In 2018, the industry fell into a "quant winter" that lasted several years, during which automated investment strategies generally failed, and profitability was significantly impaired. However, despite the recent severe market turbulence, the Goldman Sachs memo showed that **systematic long-short funds are still up approximately 1.7% cumulatively so far this month, indicating that the overall situation has not yet descended into a complete collapse.** Notably, in July, the weeks-long sell-off in AI-related stocks caught Wall Street off guard, **with many hedge funds recording monthly losses.** > The most prominent case was the highly leveraged AI-themed fund Situational Awareness, which was ultimately forced to sell most of its public equity positions to Citadel at a significant discount. **Even institutions known for stable profitability were not spared.** Reportedly, Jane Street, the mysterious trading firm dominating global markets, recorded losses of approximately $15 billion last month due to its bets on Situational Awareness and related AI stocks. ### Related Stocks - [MS.US](https://longbridge.com/en/quote/MS.US.md) - [MRNA.US](https://longbridge.com/en/quote/MRNA.US.md) - [MRNX.US](https://longbridge.com/en/quote/MRNX.US.md) - [MRNY.US](https://longbridge.com/en/quote/MRNY.US.md) - [GS.US](https://longbridge.com/en/quote/GS.US.md) - [.SPX.US](https://longbridge.com/en/quote/.SPX.US.md) - [W4VR.SG](https://longbridge.com/en/quote/W4VR.SG.md) - [MS-O.US](https://longbridge.com/en/quote/MS-O.US.md) - [MS-Q.US](https://longbridge.com/en/quote/MS-Q.US.md) - [MS-E.US](https://longbridge.com/en/quote/MS-E.US.md) - [MS-I.US](https://longbridge.com/en/quote/MS-I.US.md) - [MS-L.US](https://longbridge.com/en/quote/MS-L.US.md) - [MS-P.US](https://longbridge.com/en/quote/MS-P.US.md) - [MS-A.US](https://longbridge.com/en/quote/MS-A.US.md) - [MS-F.US](https://longbridge.com/en/quote/MS-F.US.md) - [MS-K.US](https://longbridge.com/en/quote/MS-K.US.md) ## Related News & Research - [Moderna stock soars on cancer vaccine success](https://longbridge.com/en/news/296405393.md) - [Moderna shares surge after it says its experimental mRNA cancer treatment passed a key test](https://longbridge.com/en/news/296382081.md) - [MEXC Lists Ondo Tokenized Stock Moderna (MRNAON), Expanding Access to U.S. Biotech Exposure](https://longbridge.com/en/news/296603043.md) - [Moderna Just Doubled on a Massive Cancer Breakthrough. Here’s Why MRNA Stock Isn’t a Buy Yet.](https://longbridge.com/en/news/296643850.md) - [If You Invested $1,000 In Moderna Stock at IPO, Here's How Much You'd Have Now](https://longbridge.com/en/news/296641626.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**