Bloomberg: Wall Street consensus trades fail, AI panic triggers market volatility

According to Bloomberg, as Wall Street enters 2026, investors generally hold record low levels of cash reserves and minimal hedging, but several consensus trades have gone wrong six weeks later.

AI has shifted from a "sure-win" trade to a market threat, not to companies developing AI, but to light-asset businesses that may be replaced by AI, such as software companies, wealth managers, and tax advisors. Market volatility has intensified, inter-asset correlations have increased, and energy, consumer staples, and government bonds, which were not favored at the beginning of the year, are leading the market instead.

A Bank of America survey shows that the cash holding ratio of investors has hit a historic low of 3.2%, with nearly half of fund managers having no downside protection measures. Analysts warn that beneath the surface calm of the market lies immense pressure, which could trigger more volatility shock events.