Momentum Trade Cracks: Hedge Funds Post Worst Month in 20+ Years Versus S&P 500

The most crowded trade on Wall Street just cracked. Momentum — buying winners and shorting losers — doubled the S&P 500 over five years. The popular hedge-fund version of the trade then booked its worst month against the S&P 500 in over 20 years, with August 19 marking the worst day for systematic long-short funds in more than two years.
No crash was required to trigger the unwind. Moderna, the most shorted stock in the S&P 500, jumped more than 150% in August on a cancer-vaccine headline, and the crowded book unwound at once.
The same crowding is said to now sit under the AI and chip names everyone owns — Nvidia jumped 9% on earnings — and sentiment can flip that fast without warning.