November 11, 2026: Crowded Trades, Sharp Reversals

Last Thursday, the Nasdaq 100 Index, which comprises many of the country’s largest publicly traded technology companies, declined 6.4%, its largest one-day decline since March 2020. Most pundits attributed the selloff to concerns that newly elected Democratic congressional majorities and governors could impede the development of data centers and the broader AI infrastructure buildout. While that sentiment may have influenced the day’s trading, in our view, the substantial crowding into AI-related stocks leading up to the election had as much to do with the market’s reaction as did predictions about future regulation.

In other words, investors entered the election heavily exposed to so-called momentum stocks, or stocks that investors favor because their prices have been rising and are expected to continue rising. Momentum can also become self-reinforcing as strong performance attracts more buyers, pushing prices higher and encouraging still more buying.

As the chart below shows, momentum stocks had outperformed low-volatility stocks, defined as stocks with relatively stable price movements, by wide margins approaching the end of both the second and third quarters. As a result, investors were arguably overexposed to momentum, leaving the market vulnerable to a reversal. The election and its unexpected outcome provided the occasion for that correction.

Weekly Market Update: November 11, 2026