The 24‑hour post‑midterm election rally quickly turned into a sharp selloff, wiping out $3.7 trillion in U.S. market value. After initial gains from a "blue wave" and easing oil prices, investors grew wary of Democratic skepticism toward data‑center expansion critical to the AI boom. Retail investors kicked off the decline, followed by hedge funds, long‑only managers, and quantitative firms riding volatility.
The Nasdaq 100 posted its worst drop since March 2020. Mohit Kumar of Jefferies called Thursday’s retail selling the largest since the Covid crash, with Vanda Research noting it ranks behind only two March 2020 days. Hedge funds amplified pressure, while institutional buyers stayed on the sidelines.
Mechanical trading, including options dealers’ negative gamma exposure ($7 bn per 1% move) and volatility‑control funds offloading $61 bn, added further selling pressure. Leveraged ETFs added another $47 bn of stock sales at day’s end, deepening the market’s tumble.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing