Goldman Sachs: Hedge Fund Positions Could Create Conditions for a Significant Rebound in U.S. Stocks

Odaily News Goldman Sachs Group's trading desk stated that the positioning structure of hedge funds in the U.S. stock market has created conditions for a significant rebound in the stock market following recent volatility. Speculative investors have largely maintained bullish positions at the individual stock level while establishing hedges through products such as shorting ETFs and stock index futures. Data from the bank's prime brokerage team shows that short positions in such products have currently risen to their highest level since September 2022. This structure reflects the market's response to uncertainties stemming from the war in Iran, credit risks, and AI-related concerns. John Flood, Head of Americas Equity Execution Services and Partner at Goldman Sachs, said that if positive news emerges and prompts investors to unwind their hedges, this structure could also drive a relatively large market rally. "If there are headlines announcing the end of the conflict, there could be a rapid upward move at the index level. It could rise 2% to 3% in a short period, with most of that coming from the covering of short positions in macro products," Flood said. "The right-tail risk is currently more extreme than the left-tail risk," meaning the possibility of a sharp upward market move is greater. "Given the very high total exposure and significant shorting in macro products, any positive news could trigger aggressive short covering." (Jin10)