Long-term return reversal begins - winners and losers since 2025 set to swap places as Nikkei <50,000, JGB 10Y <2% tail risks rise

The JPMorgan QDS team believes market conditions have changed. Following the US midterm elections, uncertainty over AI development and data center construction policy increased, triggering a massive global sell-off in AI-related stocks; the move should be viewed not as mere sector rotation but as a transition into an adjustment phase with deleveraging pressure. On November 6 the Nikkei Average dropped below 60,000, falling sharply to the 57,000 level. CTAs had stayed on the sidelines at 62,000, but once the index fell to around 57,800 - the estimated average cost of their net longs from October 2025 onward - they shifted to selling to trigger stop-losses. Over 40% of CTAs' net long Nikkei futures positions have already been unwound versus the recent peak. Assuming the index keeps trading below 57,800, a further reduction of around 25%, bringing net longs to about 65% of peak, will be necessary, risking a nearly 6,000-point fall; the 53,250 level, the average cost of cumulative net long