According to Morgan Stanley, hedge funds have reduced their gross exposure to equities by more than 8% since June 2026, marking their largest pullback since at least 2017. The decline comes as the leverage of U.S. long/short funds has been below 10% for only 10% of the past twelve months. At the same time, artificial intelligence-related stocks have declined, with Samsung, SK hynix, Micron and SanDisk collectively losing nearly $1 trillion in market value between early and mid-October 2026. Observers view the move either as a defensive adjustment amid volatility or as a signal of a possible correction, with potentially significant implications for liquidity in equities and cryptocurrencies.
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