How bad is the U.S. stock market? Hedge funds have already lost enough to lay off employees overnight

The first week of November 2026 will undoubtedly be a week that goes down in the annals of the U.S. capital markets. On one side, the Democratic Party made historic breakthroughs in key states during the U.S. midterm elections, and the next day saw the most severe single-day drop in U.S. stocks since March 2020.

The S&P 500 index fell by 4.36%, with component stocks losing about $2.9 trillion in market value in a single day. The Nasdaq Composite Index dropped by 5.52%, retreating 11% from the historical high set in October, entering a technical correction. The Nasdaq 100 index plummeted by 6.4%, marking the largest single-day drop since March 2020, with a single-day market value loss of about $2.3 trillion. The Philadelphia Semiconductor Index crashed by 12%, the largest drop since 2020. The Dow Jones Industrial Average fell by 3.44%.


In fact, the market did not start to decline on November 5; it began to drop when the Republican expectations for the midterm elections were not high in October.

In October, Goldman Sachs data showed that short-selling bets on individual stocks rose to a near five-year high; Morgan Stanley's data indicated that stock-picking funds made the largest active reduction in over a decade in October, with net exposure to the market decreasing by about 9% since June. By the end of October, over 40% of funds had their year-to-date returns flattened or turned negative.

Global hedge funds averaged a loss of about 3% in October. It may not sound alarming, but this is an average. Breaking it down, large multi-strategy and stock-picking funds were almost all affected.


On the same report card, Citadel's Wellington fund was one of the few positive performers, gaining 1.7% in October and 15.3% year-to-date. The vast majority were negative: LMR -0.8%, Dymon Asia -1.8%, Man Group's 1783 fund -1.8%, Point72 -2.0%, Millennium -2.3%, North Rock -2.3%, ExodusPoint -2.4%, Verition -2.5%, Schonfeld -2.7%, Balyasny -3.4%, Pinpoint -4.5%, Marshall Wace's Eureka strategy -5.4%, Engineers Gate -5.5%, Walleye -5.9%.

In extreme cases, Lone Pine fell 8.8% in October; Arini, which focuses on credit bonds, had dropped 12.1% as of October 23, marking its worst monthly performance since inception.

Millennium, Point72, Schonfeld, Balyasny, ExodusPoint, Verition, Pinpoint, North Rock, Dymon, Man Group, LMR—these names usually appear in the context of "stable, low volatility, double-digit annualized returns," but in October, they lined up with negative signs.

### One Month, Wiping Out an Entire Year

Just how damaging was October?

A multi-strategy fund managing several billion dollars typically aims for an annualized return of about 10% to 15%, which translates to normal monthly fluctuations of ±1% to 2%. The hit in October was between 2% and 6%, 2 to 4 times that of a normal month.

For a fund like Walleye, which is about $17 billion in size, a -5.9% means a loss of about $1 billion in a month.

A more intuitive calculation is to look at October's losses alongside the gains accumulated over the first nine months of the year.


- Citadel Wellington: October +1.7%, Year-to-date +15.3%------Monthly return is equivalent to 13% of the first nine months, hardly affecting annual returns.

- Millennium: October -2.3%, Year-to-date +5.7%------Retracted 28% of the cumulative returns from the first nine months.

- Point72: October -2.0%, Year-to-date +8.6%------Retracted 19% of the cumulative returns from the first nine months.

- Marshall Wace Eureka: October -5.4%, Year-to-date +5.3%------Retracted 48% of the cumulative returns from the first nine months.

- Walleye: October -5.9%, Year-to-date -6.8%------Monthly loss directly turned the annual return negative.

- Balyasny: October -3.4%, Year-to-date -2.7%------The first nine months were still positive, but the monthly return turned negative.

Not to mention Situational Awareness, which didn't even last until October; it lost 70% in July and went bankrupt.

### Losing Money Leads to Refunds, Layoffs, and Strategy Closures

Losing money naturally has its own chain reaction, leading to the withdrawal of entire strategy lines and returning funds to investors.

### Walleye Capital: Laid off stock long-short manager, refunded part of the funds

Laid off stock long-short manager Anil Gondi and "a significant portion" of the internal long-short team. Gondi joined in July 2025 and had previously been a long-term equity investment manager at Balyasny Asset Management and founded 6elm Capital.

CEO and Chief Investment Officer Will England acknowledged in a letter to investors that the investments made over the past few years to improve the internal equity business (including bringing in new executives) "did not yield the expected results," with opportunity costs and resource consumption relative to returns being too high. At the same time, they plan to return part of the funds to investors.

### Engineers Gate: Laid off most of the Synthesis equity team

After losing 5.5% in October, Engineers Gate directly laid off most of its equity team named Synthesis, including the team leader, leaving only five fundamental managers. They stated in a client letter that after the rapid downturn of AI and tech stocks, the team's performance was insufficient to continue in its current form; the company also reduced capital or terminated cooperation with a few portfolios.

### Samlyn Capital: Sold almost all holdings outside of financial stocks

Managing about $7 billion, Samlyn sold almost all holdings outside of financial stocks, laid off several senior analysts, and shifted focus to the global financial sector.