"Sell everything in Europe"! The third-largest sell-off in ten years, with funds capitulating across the board

Does the self-reinforcing effect of AI · CTA strategy exacerbate the current downside risk?

Data from multiple sources show that European assets are experiencing one of the most intense sell-offs in nearly a decade, with institutional investors rapidly reducing their European exposure.

According to Goldman Sachs Prime Brokerage data, net selling of European assets last month reached the largest single-month decline since March 2025, ranking third in the past ten years, with a short-to-long ratio as high as 2.2 to 1.

Meanwhile, JPMorgan data indicates that the European aggregate position indicator has fallen to its third-lowest level since 2015, with the standard deviation dropping below -1.5, and four-week position changes falling below -2 standard deviations.

This figure suggests that the current net short pressure in European holdings is among the most extreme in the past decade, only seen after a few historic market stress moments.

JPMorgan further shows that, measured by the one-month position change Z-score, the CTA group’s reduction in European assets has reached the most extreme level in the history of this data series.

As a trend-following strategy, CTA’s concentrated flight often has a self-reinforcing effect, adding additional downward pressure on the market from a technical perspective.

JPMorgan’s position team notes that, considering hedge funds, CTAs (Commodity Trading Advisors), and pure long-only funds collectively, the overall European position is already at an “extremely low level.”

Signs of capital withdrawal are not only reflected in stock holdings but are also corroborated by systemic risk aversion in the foreign exchange market.

The skewness of euro options continues to decline, indicating that market participants are generally betting on a further decline in the euro.