July was a quiet month at the index level.
Underneath the surface, it was one of the most violent hedge fund and factor unwinds in decades.
Crowded AI trades collapsed. Momentum was crushed. Margin calls hit. A major portfolio was forced into the market.
Based on history, this was a cleansing event.
But the bigger story is the disruption AI is causing:
• Market structure has changed forever
• Factor volatility is structurally higher
• AI is compressing economic time
• Terminal values are becoming harder to estimate
• Leverage is turning valuation uncertainty into liquidity risk
• Compute demand remains insatiable
The S&P is still in a bull market. Earnings remain strong. Breadth is healthy. The AI trade has corrected in both price and time.
Now the question is whether we get a true follow-through day pattern confirming that the panic low was a durable bottom for AI trades.
New video:piped.video/VVfTS50v91I