In the stock market, the biggest single-day surges almost always follow a correction, crash, or outright panic. Historical data backs this up: 24 of the 30 best trading days in the last 30 years happened after major downturns dominated headlines.
Why? Let’s break it down:
Market selloffs act as a cleansing mechanism, forcing weak hands and overleveraged traders to liquidate. As panic peaks—what traders call capitulation—patient, strategic investors step in to seize discounted opportunities.
Right now, we’re in one of those moments, just as a massive Fed meeting kicks off this upcoming Wednesday. The market has been in a three-week freefall. Part of that is now being shown to be attributed to over leveraged hedge funds getting wiped out in crowded positions.
Could their timing be any worse? I’ve never seen hedge funds (and CTAs apparently) get steam rolled like that!
I thought they were the smart money? All the while, the following items just happened:
✅ The largest spending bill in U.S. history was just announced.
✅ Inflation is finally stabilizing.
✅ Interest rates are near 52-week lows.
✅ Deregulation is sweeping through multiple industries reducing legal costs and overhead
✅ Tax cuts are now on their way to being passed including no tax on tips, no tax on over time, etc etc
Meanwhile, U.S. households are sitting on record levels of cash in money market funds - see attached images.