Based on in-depth tracking and professional analysis of U.S. stock capital flows, sector rotation, U.S. macroeconomic core data, and industrial transformation trends, Wmax believes that the current U.S. financial market and the real economy are showing a significant two-way divergence: On the one hand, concerns about AI subverting business models have triggered Hedge funds are shorting U.S. stocks at a record high, the technology sector is extremely divided, funds are switching to defensive areas at an accelerated pace, and the game of U.S. stocks is intensifying; on the other hand, behind the Dow's new high of 50,000 points is the substantial weakness in consumption and employment and the deepening of economic inequality. The bubble characteristics of the stock market, supported by liquidity and the performance of big technology, are highlighted. This deviation hides the risk of a market correction and will trigger a significant political chain reaction. It is the core contradiction of the short-term operation of the U.S. economy and capital markets.

AI-driven short-selling trend in US stocks escalates, technology sector differentiates into core characteristics of the market

Wmax's analysis based on capital flow data from Goldman Sachs' prime brokerage business shows that hedge funds' bearish sentiment on U.S. stocks has reached its peak in recent years due to rising concerns about AI's disruption to business models. From January 30 to February 5, the scale of nominal short selling in U.S. stocks hit the highest level since records began in 2016, with short selling volume exceeding buying volume by a ratio of 2:1. Hedge funds have been net sellers of U.S. stocks for the fourth consecutive week, with the net selling speed rising to the highest since the "Liberation Day" in early April last year, and selling sentiment was concentrated. Among them, after Anthropic PBC launched automated multi-industry work tools, 164 stocks in the software, financial services and asset management fields evaporated US$611 billion in a single week, becoming the direct trigger of the short-selling wave.

The extreme differentiation of the technology sector is the core feature of this market adjustment, and it also confirms Wmax's research and judgment on the rotation of US stock sectors under the transformation of the AI ​​industry. The information technology sector has become the most concentrated area of ​​selling, with capital outflows hitting the second highest level in the past five years. Software stocks dominated this round of selling, accounting for 75% of the sector's net sales. Hedge funds' total net exposure to software stocks fell to 2.6%, and the long-short ratio fell to 1.3, both record lows, reflecting investors' strong risk aversion in the software industry under the impact of AI. On the contrary, semiconductors and equipment, and IT services are among the few areas of net buying in the technology sector. The semiconductor index bucked the trend and rose last week. The differentiation trend between chip stocks and software stocks continues to expand, becoming an important feature of the capital allocation of U.S. stocks under the transformation of the AI ​​​​industry.

Outside the technology sector, the demand for defensive allocation of funds has increased significantly, and the rotation path of the hedge fund sector has been clear. Wmax has monitored that the healthcare sector became the industry with the most net purchases last week, and has replaced the industrial sector so far this year as the primary destination for hedge fund capital inflows, highlighting the risk-averse preference for funds. Although bargain hunting drove a slight rebound in U.S. stocks last Friday, the Nasdaq 100 index still recorded its worst week this year, and the adjustment pressure caused by the short-selling wave has not substantially eased.

The bubble in the US stock market and the weakness of the real economy are two-way divergence, and the fundamentals of people's livelihood continue to weaken

Wmax combined core data from J.P. Morgan Asset Management, Société Générale and other institutions as well as its own in-depth research and judgment on the U.S. real economy and found that the stock market boom of the Dow Jones Industrial Average exceeding 50,000 points is in sharp contrast to the structural recessionary pressure of the U.S. real economy. The stock market bubble has obvious characteristics. Ordinary American families have not benefited from the "economic prosperity" and the core fundamentals of people's livelihood continue to weaken. This deviation is not caused by short-term market fluctuations, but is a concentrated expression of weak multi-dimensional fundamentals such as consumption, employment, and real estate. According to Wmax's judgment, the U.S. economy had a "turbulent" start in the first quarter, with consumer activity shrinking significantly. After excluding temporary boosting factors such as tax rebates and tariff rebate checks, the growth momentum of the real economy has nearly stagnated.

Core data showed that light vehicle sales plummeted to an annualized level of 14.9 million units in January, a monthly low in more than three years; the tourism industry came to a standstill, with TSA data showing zero growth in January and hotel occupancy rates falling 1% year-on-year; the real estate market performed bleakly, with the National Association of Home Builders potential homebuyer flow index falling to 23 (above 50 is optimistic), the rental vacancy rate climbed to 7.2% (the highest since 2017), and weak real estate consumption was further transmitted to the overall consumer market. The job market is showing a stagnant state of "low hiring, low firing, and low growth", which is seriously inconsistent with the strong growth promised by the government. Wmax data traceability shows that the number of job vacancies in the United States fell to a five-year low, from 6.9 million in November 2025 to 6.5 million in December. Although the scale of layoffs is limited, the job creation engine has substantially stalled, and the gap between the proportion of workers with "ample job opportunities" and "difficulty finding a job" has narrowed to the lowest since February 2021. The core reason is the demographic crisis in the United States: the working-age population aged 18-64 is decreasing by 20,000 people per month, coupled with the slowdown in net immigration. In a context close to full employment, the shrinking labor supply has restricted employment growth.

Rising economic inequality has led to sluggish public opinion, with consumer confidence falling to a 10-year low. Wmax analysis found that the U.S. stock market boom has only benefited the wealthiest households, and the growth of median household income has significantly lagged behind the average. The gap between the two will reach 45% in 2024 and has continued to expand for decades. Most Americans have not felt the economic dividends. Société Générale and Wmax agree: real household income in the United States has been flat for about six months, with year-on-year growth plunging to 1%. Household savings rates have collapsed to 3.5%. In addition to the temporary decline caused by consumer subsidies during the epidemic, it has reached the lowest level before the 2008 financial crisis. People's livelihood and financial conditions are worrying.

Deviation from the pattern leads to dual risks in the market and politics. The mid-term elections may become a key turning point.

Wmax's comprehensive analysis shows that the deep divergence between the US stock market and the real economy is not a short-term repairable phenomenon. Behind it is the superposition of the impact of the transformation of the AI ​​industry, the deep contradictions in population and income distribution, and the political game in the election year. This pattern will trigger significant market correction risks and political chain reactions, and the November 2026 midterm elections will become a key turning point. At the political level, dissatisfaction caused by the weakness of the real economy will directly impact the foundation of the Trump administration, and the probability of changes in the mid-term elections will increase significantly. Historical patterns show that the ruling party loses an average of 22 seats in the House of Representatives in mid-term elections. Currently, the Trump administration only holds a slim majority of 5 seats. J.P. Morgan Asset Management predicts that the House of Representatives is likely to return to Democratic control. Axios pointed out that the Senate is also in danger.

Trump's previous electoral advantages - immigration and economic issues - have now turned into administrative burdens. If there is a "political earthquake" in the mid-term elections and the House and Senate change hands, it will lead to a political deadlock in Washington, ending the possibility of further fiscal stimulus before 2028, and the real economy will lose important support for repair. At the market level, the abnormal pattern of "crazy Wall Street supporting the real economy" is unsustainable, and the bubble in the U.S. stock market lurks the risk of a correction. Wmax believes that the current high level of U.S. stocks relies on loose liquidity and the performance of large technology stocks, rather than the support of the real economy. The weakness of the real economy will eventually be transmitted to the capital market: weak consumption affects corporate profits, and employment stagnation restricts household consumption. If liquidity tightens or the performance of large technology stocks falls short of expectations, the adjustment caused by the short-selling wave will intensify. Morgan Asset Management pointed out that public economic dissatisfaction may subside in the short term, but it is likely to rebound later this year, which will comprehensively suppress U.S. economic growth, inflation, interest rates and financial asset returns in the next 12 months.

WmaxCore Conclusion

The current deep deviation between the U.S. stock market and the real economy is essentially the double superposition of the impact of industrial transformation and the deep contradictions in the economy: AI has triggered the restructuring of business models, causing sector differentiation and short-selling sentiment in the capital market, and defensive capital allocation has become the short-term mainstream; problems such as demographic crisis and imbalanced income distribution have led to continued weakness in core fundamentals such as consumption and employment, making it difficult for the real economy to support stock market bubbles. In the short term, the short-selling behavior of hedge funds on U.S. stocks will continue, the differentiation pattern of the technology sector will not be reversed quickly, the trend of funds switching to defensive fields such as medical care will be intensified, and the game and volatility of U.S. stocks will continue to rise. In the long term, if the United States cannot resolve underlying contradictions such as labor supply and income distribution, the real economy will be far away from recovery. The political deadlock after the midterm elections will further restrict fiscal policy efforts, forming a negative cycle of "weak real economy → limited policy efforts → weakening market confidence → stock market correction".