BofA: Nasdaq Tech De-Risking by Major Funds Nearing End, Market Nears Crossroads

Bank of America (BofA) reports that major de-risking by Commodity Trading Advisors (CTA) in the Nasdaq market appears 'largely complete' as of early August 2026. This means the bulk of systematic selling of technology stocks by these powerful trend-following funds, triggered by recent market choppiness, might be over. The development suggests a crucial turning point for the tech-heavy index, which has seen substantial unwinds in its long positions over recent weeks. CTA, who use systematic strategies to follow price momentum, significantly reduced their exposure to both the S&P 500 and Nasdaq throughout July 2026, driven by rising U.S. Treasury yields and a stronger dollar that forced them to unwind trades. While shorter-term models likely shifted to short positions, BofA indicates that only 'residual long exposure' remains, held mostly by slower, longer-term strategies. This follows earlier warnings from BofA in June that a further 90 basis points to 2% downside in Nasdaq could spark broader unwinds, implying much of that potential selling has now materialized. The broader market sentiment from BofA in late July also painted a cautious picture for August, favoring defensive assets like the dollar and gold amidst a 'nakedly dovish' Federal Reserve and concerns over tightening financial conditions. Now, the market faces 'two-sided' risks. If equity markets rebound, CTA could swiftly rebuild their long positions, especially since longer-term trend signals remain broadly positive. However, continued declines could trigger more selling as the remaining slower-moving models are forced to unwind. Investors will be closely watching upcoming economic data and speeches at the Jackson Hole Symposium later in August, which BofA identifies as a potential inflection point for yield dynamics and broader financial policy, amidst ongoing geopolitical concerns like the AI supremacy race.