Goldman Sachs: Hedge fund positions may create conditions for a sharp rebound in US stocks

Golden Ten Data reported on March 11 that Goldman Sachs Group's trading division stated that the position structure of hedge funds in the US stock market has created conditions for a significant rebound after recent market volatility. Speculative investors generally maintain long positions at the individual stock level, while establishing hedges by shorting ETFs and stock index futures. Data from the bank's main brokerage team shows that short positions in these products have now risen to their highest level since September 2022. This structure reflects the market's response to uncertainties arising from the Iran war, credit risks, and concerns related to AI. John Flood, Head of US Equity Execution Services and Partner at Goldman Sachs, said that if positive news emerges and prompts investors to unwind hedges, this structure could also drive a substantial market rally. "If a headline announces the end of the conflict, there could be a rapid upward movement at the index level. The market could rise by 2% to 3% in a short period, with most of the gains coming from the covering of macro product shorts," Flood said. "Currently, the right-tail risk is more extreme than the left-tail risk," meaning the likelihood of a significant upward market move is greater. "Due to the very high total exposure and the large amount of shorting in macro products, any positive news could trigger aggressive short covering."