Wall Street Banks: Tech Deleveraging Nearing End, Macro Risks Take the Baton
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JPMorgan, Goldman Sachs, and Société Générale converge on one call: the most violent phase of tech deleveraging is likely over, but stubborn inflation and surging Treasury yields mean macro risk — not positioning — now drives prices, and buying the dip still faces real obstacles.
How far has the deleveraging gone?
JPMorgan data: leveraged ETF assets fell from a peak of $50 billion to $17 billion; hedge-fund net exposure in tech dropped from 5.0 standard deviations to 1.7.
Goldman data confirms: Korean leveraged-ETF AUM fell from a June peak of $53 billion to $15 billion; momentum-factor leverage sits at the 28th percentile of the past year's range.
This means → The most crowded tech trades have been forcibly wrung out, and room for further large-scale liquidation is very limited — but limited deleveraging risk does not equal safety.
Earnings look great — why not buy the dip?
S&P 500 constituents are on track for 47.4% year-over-year earnings growth in Q2 — the strongest quarter in five years; 64% of reporting companies beat estimates by at least one standard deviation.
AI-infrastructure stocks contributed roughly one-third of S&P 500 EPS growth in Q2.
In plain terms = Corporate profitability is not the problem. Markets have already moved past earnings — rates, inflation, and growth are the judges now.
What are inflation and Treasury yields signalling?
The 10-year Treasury yield has climbed to around 4.74%; the 30-year broke 5.27%, a nearly 19-year high. JPMorgan raised its 10-year target to 4.85%.
Société Générale expects core PCE — the Fed's preferred inflation gauge excluding food and energy — to stay above 3%, pressured by tariffs, AI capex, and persistent fiscal deficits.
This means → The bond market is already pricing in "inflation far stickier than expected," and the high-rate environment is not easing any time soon.
Will the Fed hike again?
The July meeting held rates steady on a 9-to-3 vote; three hawkish members dissented in favour of a 25-basis-point hike. Market-implied probability of a hike by September or October stands at roughly 90%.
Goldman vice-chairman and former Dallas Fed president Kaplan warned explicitly: if inflation does not cool, the Fed could restart hikes as early as autumn — and likely not just once, but in a series of two to three consecutive moves.
This reflects an open split inside the Fed — the debate is no longer "cut or hold" but "hold or hike," a fundamental shift in market expectations.
What is Wall Street recommending now?
The S&P 500 equal-weight index rose 1.3% in July while the cap-weighted S&P 500 fell 0.1% — gains are broadening from a handful of mega-caps to a wider set of sectors.
Société Générale recommends: long equal-weight S&P 500 and TIPS, short 10-year Treasuries; favours banks, industrials, utilities, and materials.
RBC holds its year-end S&P 500 target at 8,150 (implying ~11.4% upside); Goldman targets 8,000 (~8% upside) — but both warn volatility will intensify.
Who holds the final verdict?
The tail end of deleveraging means the odds of a positioning-driven crash are falling, but macro risk is filling that gap.
Goldman lists "reverse dispersion trades" — betting that single-stock moves will diverge again rather than moving in lockstep — as one of the best strategies for the current environment.
In plain terms = The ultimate judge of market direction has shifted from "who is selling" to inflation and rate data themselves — the next CPI print and Fed minutes matter more than any positioning signal.
Content is for reference only, not financial advice.