Goldman Sachs reported that the three-month implied average stock correlation across the S&P 500 has fallen to a record low of 0.14, signaling a market splitting in two. This fragmentation coincides with a sharp collapse in AI momentum after months of gains at the start of 2026. Goldman’s Momentum factor annualized volatility spiked to 36%, the highest reading outside of a recession in 45 years, while the correlation between Goldman’s AI basket and the S&P 500 AI index has turned negative. Hedge funds are executing a coordinated retreat from AI positions, creating a feedback loop that could persist for weeks or even months.
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