According to JP Morgan Chase, the $5.5 trillion S&P 500 correction was most likely driven by two types of equity hedge funds adjusting their positions rather than investor concern about a potential recession: Quant hedge funds & TMT sector hedge funds. Quant hedge funds typically use data and code to make investment decisions, while TMT sector hedge funds primarily invest in firms related to technology, media and telecommunications. Bank of America said S&P500 has more downside potential before reaching a price floor while Morgan Stanley said S&P500 is now hovering at an area where it could ignite tactical rallies, saying that 5,500 should provide support for a tradable rally led by cyclicals, lower quality, and expensive growth stocks that have been hit the hardest and where the short base is the greatest. As it turned out, the recent falls from 3/4/25 to 8/4/25 were much more severe than anyone expected.
Source: Daily Hodl