"At the moment when "AI disrupts everything" and greatly impacts the market, how can "smart money" achieve alpha? The answer is short-term tactical operations."

The smart money on Wall Street has definitely come out on top in the tariff turbulence. Due to the drastic fluctuations in tariffs, negative sentiments regarding the disruptive impact of artificial intelligence, and the brewing of a new round of conflicts in the Middle East, the market has been turbulent and uncertain. Hedge funds and actively managed stock pickers focusing on short-term tactical strategies outperformed the benchmark indices. Amid the increasingly noisy and restless Wall Street giants due to the recent market volatility, they are doing something that holding onto benchmark stock indices for the past few years cannot achieve - making the so-called smart money look extremely wise. In the midst of the tariff policy turbulence, the pessimistic selling caused by the "AI disrupts everything", the escalation of geopolitical tensions in the Middle East, and the market volatility due to overvaluation, those hedge funds and institutional investors focusing on short-term tactical operations and stock selection strategies based on quantification instead of long-term fundamental strategies have achieved significant "alpha excess investment returns". These returns are something that the past decade of holding on to long-term buy-and-hold based on fundamentals could not bring. The so-called "alpha" is defined as the actual investment returns far exceeding the "beta returns" - referring to the synchronized investment returns achieved by tracking benchmark stock indices. The synchronized returns achieved by tracking benchmark indices are also known as "beta returns". Short-term tactical strategies prevail! Smart money outperforms indices in volatile markets This is also why globally renowned hedge funds with the title of "smart money" have performed excellently. Those short-term operational institutional investors focusing on active stock picking have reached levels not seen since 2007 in terms of beating benchmark indices. Quantitative investment strategies, return overlap strategies, and risk parity allocation strategies - all these smart money strategies have outperformed mainstream benchmark indices. In short, bond yields, credit spreads, and the S&P 500 index have been stagnant for weeks. For professional institutional investors who favor short-term tactical trading, the situation is completely different. As shown in the above figure, the complexity is very evident - risk parity, return overlay funds have performed far better than the S&P 500 index. The market is currently in a highly unstable and multi-factor disruption state. On the policy front, the back and forth fluctuations in tariffs bring severe uncertainty; on the technological front, concerns about the disruptive impact of AI are hitting software and growth sectors; geopolitically, the escalation of tension in the Middle East is also driving energy and safe-haven asset volatility. With overall valuations high, the traditional "buy and hold" strategy no longer has a significant advantage, and even appears sluggish in volatile markets. In contrast, short-term tactical allocation and active strategies have significantly outperformed purely passive index tracking in this round of the market. The core factors behind the recent tech stock crash and the rotation of downturns in various sectors can be attributed to the pessimistic narrative of "AI disrupts everything". The "AI disrupts everything" narrative swept through the global financial markets in mid-February, with the emergence of a series of AI tools/agent-based AI intelligence collaboration platforms launched by Anthropic, also known as "OpenAI's archrival," triggering a wave of massive sell-offs in the SaaS subscription software sector and the broader software sector in the stock market. Influenced by this severe concern sentiment, the S&P 500 software and services index fell by about 15% since late January, wiping out nearly $1 trillion in market value in just one week. In the current market environment, smart money strategies such as hedge funds, active stock picking strategies, quantitative models, risk parity allocation all have demonstrated outstanding performance: hedge fund indices achieved nearly 3% returns in the past month, doubling the performance of the S&P 500 index and outperforming US bond and corporate bond indices by a wide margin; multi-asset quantitative trading strategies and structured products have also shown positive returns, relying on volatility arbitrage, relative value, and trend following technologies to achieve significant excess returns. In contrast, the S&P 500 index and bond yields have been stuck in a range of volatility, causing the market's passive strategies to remain apathetic. Market divergence and opportunities lie in the background of inconsistent macro and industry risks: software stocks experienced a significant sell-off due to AI threat concerns, with this sharp adjustment spreading to industries including insurance, real estate, and traditional labor-intensive industries; energy and safe-haven assets such as oil prices and gold have been on the rise, indicating capital is seeking diversified risk paths. In addition, after the US Supreme Court overturned most global tariffs, President Trump quickly announced a new 10% global tariff plan, showing resilience in the stock market but pressure on bonds and the US dollar, emphasizing the directional volatility of short-term market. From an investment strategy perspective, the current market environment is not a long-term "low volatility, low decision-making cost" paradise for passive investment, but a mid-term stage with abundant liquidity, difficult direction judgment, and tactical opportunities. In this background, the urge for tactical operations in uncertain conditions often leads to poor results. "What investors need is a portfolio structure that does not require them to predict future trends," said Corey Hoffstein, Chief Investment Officer at Newfound Research. Despite being a shortened week due to the holiday, the US stock market still rose, with the S&P 500 index gaining 1%. For most of this year, the index has been trapped in a range of 200 points of volatility, making almost no progress, and the bullish momentum stalled around the 7,000 point level. Similarly, the 10-year US Treasury yield has remained in a range, hovering around 4%, as investors prepare for the upcoming new Fed chairman and debate over the monetary policy path.