According to Refinitiv, a bloody "kill more" tragedy is unfolding in the global financial market! Trump's sudden nuclear grade decision to impose comprehensive tariffs not only evaporated $5 trillion in stock market value in an instant, but also triggered an unprecedented wave of surrender style selling by foreign hedge funds. With the intensive issuance of margin call orders, the liquidity crisis triggered by the policy black swan is likely to intensify.

The market is flowing like a river of blood

Global stock markets have suffered a comprehensive bloodbath, with the S&P 500 index plummeting 10.5% in just two days, setting the worst weekly decline since the pandemic. The European Stoxx 600 index has fallen 14% from its historical high on March 3rd, officially entering a technical adjustment zone. At the same time, the bond market has experienced rare fluctuations, becoming both a safe haven for funds and an important tool for the market to bet on the upcoming interest rate cut by the Federal Reserve.

Hedge funds collectively 'surrender'

In the face of severe market shocks, NWI Management, a global macro hedge fund, has made it clear that it will clear that it will empty its stock position and turn to long the yen against the dollar and short-term US treasury bond bonds. Long short strategy hedge funds have become a disaster area, with the industry's net leverage ratio rapidly declining to its lowest level since the end of 2023, under the impact of the VIX volatility index's surge. What is even more worrying is that data from JPMorgan shows that CTA funds have reached a record level of bearish sentiment towards stocks, while $23 billion in leveraged ETFs are facing the risk of forced liquidation.

Margin chase order activated

Nomura Securities Chief Economist David Seif has issued a warning that, against the backdrop of a sustained market downturn, panic and forced selling triggered by margin calls may dominate market trends for some time to come. Morgan Stanley stock strategist Michael Wilson pointed out in the latest report that there have been clear signals of surrender in the market, with even defensive stocks that typically perform well during economic downturns being indiscriminately sold off. JPMorgan estimates that the volatility target investment portfolio alone will be forced to sell $30 billion worth of stocks, indicating that market pain will continue.

Increased risk of death spiral

Although theoretically any positive news could trigger short covering, the current market has fallen into a vicious cycle of "selling, seeking protection, and then selling again". Nomura Securities' David Seif commented, "This is no longer just a matter of tariff shocks, but a comprehensive collapse of the entire market liquidity mechanism

summarize

When Trump's iron fist of tariffs shatters the belief in "American exceptionalism," hedge funds are declaring the end of an era by cutting their positions. From Tokyo to New York, the alarm sounds in trading rooms are ringing one after another - this margin chase war triggered by the evaporation of a market value of $5 trillion may have just begun its bloody prelude.