What if the Magnificent Seven unwind drags down the whole index?
A 25% Mag-7 drawdown is amplified by passive funds holding ~35% in those names — forced index selling propagates to NVDA/semis and bleeds into high-beta crypto; the trade is short Nasdaq/SOX and long vol into the unwind. The DeepSeek shock (Jan-2025) is the live analogue: a single AI-capex doubt erased ~$600B from Nvidia in a session via concentration mechanics. Skeptical note: concentration cuts both ways — the same passive flows that force the selloff also snap it back, so the durable edge is owning convexity, not staying short.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a risk-off shock. A 25% drawdown in the seven largest stocks cascades through index funds holding 35% in those names. The trigger decomposes into signed root‑shocks — AI capex ▼ · Risk appetite ▼ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | Solana SOLon Hyperliquid 📈 chart | Crypto | ▼ -1.8% hist -9.85–+1.19% · other way -17.09% (n=11) |
| 2 | Nvidia NVDAon Hyperliquid 📈 chart | Equity | ▼ -1.6% hist -1.0–-0.38% · other way +4.19% (n=12) |
| 3 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -1.7% hist -2.14–+2.0% · other way +10.05% (n=12) |
| 4 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -1.4% hist -0.91–-0.36% · other way +0.03% (n=12) |
| 5 | Hyperliquid (HYPE) HYPEon Hyperliquid | Crypto | ▼ -1.4% model prior · unmeasured |
| 6 | Ether ETHon Hyperliquid 📈 chart | Crypto | ▼ -1.3% hist -8.63–+2.07% · other way +0.11% (n=11) |
| 7 | Broadcom AVGOon Hyperliquid 📈 chart | Equity | ▼ -1.2% hist -1.19–+0.48% · other way +5.73% (n=12) |
| 8 | Semiconductors SMHon Hyperliquid 📈 chart | Equity | ▼ -1.2% hist -0.81–-0.15% · other way +1.37% (n=12) |
| 9 | Micron MUon Hyperliquid 📈 chart | Equity | ▼ -1.2% hist -4.04–+0.41% · other way -1.63% (n=12) |
| 10 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -0.9% hist -5.27–+1.46% · other way +3.62% (n=12) |
| 11 | Tech sector XLK 📈 chart | Equity | ▼ -1.0% hist -0.64–-0.33% · other way +0.4% (n=12) |
| 12 | Volatility (VIX) VIXon Hyperliquid 📈 chart | Vol | ▲ +0.9% hist +0.17–+0.9% · other way -2.93% (n=12) |
| 13 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.8% hist -1.33–+0.15% · other way +1.24% (n=12) |
| 14 | AMD AMDon Hyperliquid 📈 chart | Equity | ▼ -0.8% hist -1.26–+0.07% · other way -3.31% (n=12) |
Probable recommendation
Why we may diverge from history
Trust the cascade short on XLF/HYG: the +up analogues (Dot-com peak +23%, ASML, DeepSeek) are chip-specific selloffs, not a Mag-7 passive-unwind that mechanically drags financials and credit beta with it.
Historical precedent — what analogous events actually did
Across 40 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| SOL SOL | SHORT | -7.7% · 5d -6.4% | 72% | 39 | 0.34 | ✓ matches cascade |
| MU MU | SHORT | -3.0% · 5d -3.2% | 71% | 40 | 0.32 | ✓ matches cascade |
| INTC INTC | SHORT | -4.4% · 5d -2.7% | 65% | 40 | 0.30 | ✓ matches cascade |
| ETH ETH | SHORT | -7.2% · 5d -5.3% | 63% | 40 | 0.21 | ✓ matches cascade |
| JPM JPM | LONG | +1.3% · 5d +0.4% | 63% | 40 | 0.21 | ⚠ differs |
| NVDA NVDA | SHORT | -0.2% · 5d -3.1% | 63% | 40 | 0.19 | ✓ matches cascade |
| XLF XLF | LONG | +0.6% · 5d +0.2% | 61% | 40 | 0.19 | ⚠ differs |
| Gold XAU | LONG | +0.5% · 5d -0.2% ↺ fades | 61% | 40 | 0.19 | ✓ matches cascade |
| AMD AMD | SHORT | -0.8% · 5d -2.2% | 61% | 40 | 0.17 | ✓ matches cascade |
| NDX NDX | SHORT | -0.2% · 5d -1.1% | 61% | 40 | 0.16 | ✓ matches cascade |
| Bitcoin BTC | SHORT | -4.4% · 5d -3.1% | 59% | 40 | 0.14 | ✓ matches cascade |
| QCOM QCOM | SHORT | -2.2% · 5d -2.7% | 57% | 40 | 0.11 | ✓ matches cascade |
| AUD AUD | LONG | +0.2% · 5d -0.0% ↺ fades | 55% | 40 | 0.09 | ⚠ differs |
| US dollar DXY | SHORT | -0.0% · 5d +0.0% ↺ fades | 55% | 40 | 0.09 | · |
Why this probability
Mag-7 concentration extreme in 2026; 25% drawdowns recur; AI-vol precedents frequent; short window. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.