---
title: "Wall Street giants: The most intense sell-off in US stocks may be over, but \"bottom fishing\" still carries risks"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/294667993.md"
description: "JP Morgan and other Wall Street giants pointed out that the de-leveraging process in the US tech sector is nearing its end, and the most intense sell-off may have passed. Although leverage levels have significantly declined, macro risks such as inflation concerns, interest rate uncertainty, and doubts about AI returns are still accumulating, shifting the core driving force of market pricing from position clearing to macro factors. Institutions advise investors to be wary of \"bottom-fishing\" risks and to pay attention to market warning signals"
datetime: "2026-08-03T09:12:34.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/294667993.md)
  - [en](https://longbridge.com/en/news/294667993.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/294667993.md)
---

# Wall Street giants: The most intense sell-off in US stocks may be over, but "bottom fishing" still carries risks

According to Zhitong Finance APP, after a month of intense fluctuations, the U.S. stock market is at a critical crossroads. On one hand, data from institutions such as JP Morgan indicates that the months-long deleveraging process in the technology sector is nearing its end, with leveraged ETFs, hedge fund net exposures, and CTA positions all significantly retreating from extreme levels. On the other hand, inflation concerns are resurfacing, the interest rate path is filled with uncertainty, and doubts about the returns on AI capital expenditures remain unresolved.

Macroeconomic risks are replacing position clearing as the core driving force behind market pricing. As we enter August, major Wall Street firms such as JP Morgan, Goldman Sachs, and Société Générale have been releasing strategy reports that outline a complex picture of "deleveraging nearing its end, valuations becoming reasonable again, but macro risks still accumulating."

## Deleveraging Nearing Its End: The Most Intense Sell-off in Tech Stocks Is Likely Over

In the past two months, global tech stocks have experienced a "perfect storm" driven by leveraged liquidations. The team of JP Morgan strategist Nikolaos Panigirtzoglou pointed out in a recent report that the most intense phase of deleveraging in the technology sector is likely over.

Data shows that the size of leveraged ETFs has fallen from a peak of $50 billion to $17 billion; hedge fund net exposure in the tech sector has decreased from 5.0 standard deviations to 1.7 standard deviations; and CTA (Commodity Trading Advisor) positions have retreated to the 39th percentile. In the South Korean market, the liquidation operations of leveraged ETFs have been largely completed, and hedge funds have completed about 90% of their deleveraging process, with overall leverage levels returning to a more reasonable range. **JP Morgan believes that the deleveraging process for investors in the technology and semiconductor sectors (including memory stocks) is progressing faster than previously expected, and further deleveraging space is now very limited.**

![16c126bb7a3bd1c1539515b0440fae4f.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260803/1785746031458975.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

Goldman Sachs' data also confirms this assessment. Global tech exposure has experienced the largest sell-off in over five years, with the asset management scale of South Korean stock leveraged ETFs dropping from a peak of $53 billion in June to $15 billion. **Fundamental long and short clients' leveraged exposure to momentum factors has fallen to the 28th percentile of the past year. "Crowded trades have shifted from 'everyone is on board' to a significant portion of people having already exited, or even being forced to exit."**

Hedge fund position monitoring data provides three clear signals: the combined z-score of hedge fund holdings across the entire market and factor performance has dropped to historically extreme low levels; the reduction in North American hedge funds over a five-day period corresponds to three standard deviations, indicating that the ongoing large-scale sell-off is nearing its end. The memory sector is facing a repricing opportunity—current stock prices only imply a high prosperity cycle lasting one year, and if the upward cycle extends to mid-2027, valuations will return below historical averages ![80ba0bbeb31e61076caa567b30acd5c5.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260803/1785746057107705.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

However, the end of deleveraging does not mean that the market will be smooth sailing. **Goldman Sachs' top trading team warns that although the deleveraging process is nearing its end, risks have not been completely cleared, and multiple key events will continue to suppress the market.** Goldman Sachs' latest "Fund Flows" report points out that substantial risk reduction has not yet been completed, and constrained by seasonal fund outflows and insufficient institutional offensive willingness, the upward momentum of U.S. stocks in August lacks "fuel."

## Valuation Reset and Earnings Support: S&P 500 Posts Strongest Earnings Season in Five Years

With the advancement of deleveraging, global stock market valuations have undergone a significant reset. **The premium of U.S. stock valuations relative to other regions of the world has shrunk to about 22%, the lowest level in over six years, far below the 31% ten-year average. RBC Capital Markets strategist Lori Calvasina points out that the valuations of the Nasdaq 100 index, S&P 500 index, and even the technology sector are beginning to appear "reasonable" again.**

**![952f9b7478591a5c8e570cac4667facf.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260803/1785745988100266.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)**

Meanwhile, the recently concluded second-quarter earnings season has delivered one of the "strongest ever" report cards. **FactSet data shows that S&P 500 constituent companies are expected to achieve a 47.4% year-on-year growth in earnings this quarter, marking the strongest earnings growth in the past five years. Goldman Sachs statistics indicate that among the reported constituents, 64% of companies exceeded Wall Street expectations by at least one standard deviation.**

Stocks related to AI infrastructure contributed about one-third of the S&P 500's EPS growth in the second quarter. Goldman Sachs estimates that if a few tech giants' unusually large investment gains are excluded, the overall year-on-year earnings growth of the S&P 500 is about 26%; including them, the overall growth rate soars to 45%. The profits of the constituents of the STOXX Europe 600 index jumped 19% year-on-year after nearly two years of almost zero growth.

## Macroeconomic Risks Are Accumulating: The "Sword of Damocles" of Inflation and Interest Rates

However, the earnings brilliance of the earnings season has not dispelled the macro-level gloom. **Goldman Sachs derivatives expert Lee Coppersmith warns that as the earnings season ends, the market's attention will shift back to interest rates, inflation, and economic growth. The volatility of U.S. Treasury bonds has begun to accelerate again, and real yields remain close to cyclical highs.** **![eaf806dcf556dbca0bac0d44fbc684fe.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260803/1785745980522123.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)**

Inflation pressures remain stubborn. The team of Société Générale strategist Alain Bokobza points out that the second round of tariffs in the U.S., the accelerated growth of AI and infrastructure capital expenditure cycles, increased oil price volatility, and the ongoing massive fiscal deficits in developed economies all indicate that market expectations for inflation are "much lower." **Société Générale expects core PCE to remain above 3% this year and recommends allocating TIPS, copper, and gold as inflation hedges.**

The U.S. Treasury market is pricing in this concern. The yield on the 10-year U.S. Treasury has climbed to around 4.74%, while the 30-year has surpassed 5.27%, reaching a nearly 19-year high. JP Morgan has raised its forecast for the 10-year U.S. Treasury yield to 4.85%, with the 30-year target increased to 5.40%. The steepening of the yield curve is historically very rare—markets are casting doubt on whether the Federal Reserve can maintain its 2% inflation target.

![2c45c519fd3357af9d5f0f1b967b1437.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260803/1785745966900721.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

The path of Federal Reserve interest rates is filled with uncertainty. At the FOMC meeting on July 29, the decision to keep rates unchanged was made with a vote of 9 to 3, with three hawkish members voting against it, advocating for a 25 basis point increase. The market has priced in expectations for rate hikes in September and October at around 90%. Meanwhile, Goldman Sachs Vice Chairman and former Dallas Fed President Robert Kaplan recently warned that if inflation data does not cool down, the Federal Reserve may restart rate hikes as early as this fall, and this is likely not a one-time action but a series of tightening measures over 2 to 3 consecutive times.

![e406d450ffadcbcb683310e3584d8505.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260803/1785746404398557.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

## Shift in Investment Strategy: From "Momentum Chasing" to "Value Diversification"

Against the backdrop of nearing the end of deleveraging, completion of valuation resets, and the accumulation of macro risks, Wall Street strategists are sketching a new investment blueprint. JP Morgan emphasizes that the storage sector is entering a repricing opportunity, where positioning is no longer the main issue, and fundamentals and valuations will determine the direction From market capitalization weighting to equal weighting. The S&P 500 Equal Weight Index rose 1.3% in July, while the market capitalization-weighted S&P 500 fell 0.1% during the same period. **Goldman Sachs pointed out that the equal-weighted S&P, low-volatility S&P, and the S&P 500 excluding AI all reached historical highs in the last week of July. This indicates that the market's rise is shifting from being led by a "few large bulls" to broader industry participation.**

**![f26bafd0fc42cf968237e23f88791e9d.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260803/1785746334793410.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)**

**Société Générale recommends going long on the S&P 500 Equal Weight Index, going long on U.S. inflation-protected bonds, while shorting 10-year U.S. Treasuries.** Strategists noted that the second round of tariffs in the U.S., accelerated growth in AI and infrastructure capital expenditures, increased oil price volatility, and persistently high fiscal deficits in developed economies all indicate that market expectations for inflation are currently much lower. Société Générale strategist Manish Kabra stated that currently, nine sectors have achieved double-digit profit growth, with small-cap industrial EPS rising by 30%. **He is optimistic about bank stocks, expecting a rebound in the second half of 2026; he also recommends stocks related to industrials, utilities, and materials, as well as the "reshoring to the U.S." theme.**

**![102caba9e1048503a782677f823f5a50.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260803/1785746679827849.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)**

**RBC Capital Markets maintains its year-end target for the S&P 500 at 8,150 points, believing that stronger economic growth and corporate earnings can drive the market up another 11.4%.** However, strategist Calvasina also warned that during the early stages of a change in Federal Reserve chairmanship, the S&P 500 typically experiences significant volatility, stating that "the stock market's trajectory will not be smooth."

**Goldman Sachs maintains its year-end target for the S&P 500 at 8,000 points, implying about an 8% upside potential. However,** **Goldman traders warned that as macroeconomic uncertainty persists, the likelihood of "high-correlation events" is increasing.** Traders are hedging against the overall coordinated volatility of the market—what is known as "reverse dispersion trading" has been identified by Goldman Sachs as one of the best strategies to cope with the current market.

Coppersmith pointed out that as the earnings season concludes, market attention will shift back to interest rates, inflation, and economic growth, stating that "the volatility of U.S. Treasuries has begun to accelerate again, and real yields remain close to cyclical highs, while historically, in such an environment, stock volatility typically does not maintain structural narrowing."

Tony Pasquariello, head of Goldman Sachs' hedge fund business, noted that over the past month, "a heavy hammer has smashed through consensus positions," and the most crowded, most straightforward, and easiest trades to leverage have been forced to cool down, but the risks have not disappeared

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