Goldman Sachs: Hedge fund positions may set the stage for a significant rebound in U.S. stocks

Odaily Planet Daily reports that Goldman Sachs Group’s trading division states that the positioning structure of hedge funds in the U.S. stock market has created conditions for a significant rebound after recent volatility. Speculative investors generally maintain bullish positions on individual stocks while hedging through short positions in ETFs and stock index futures. Data from the firm’s primary brokerage team shows that the short positions in these products have risen to their highest level since September 2022. This structure reflects market uncertainty caused by factors such as the Iran war, credit risks, and AI-related concerns. John Flood, Head of Equities Execution Services and Partner at Goldman Sachs Americas, said that if positive news emerges and investors unwind their hedges, this structure could also drive a substantial market rally. “If headlines announce the end of the conflict, the index could rise quickly. It might increase by 2% to 3% in a short period, mostly driven by short covering in macro products,” Flood said. “Currently, the right tail risk is more extreme than the left tail risk,” meaning the likelihood of a sharp upward market move is greater. “Because overall exposure is very high and there are large short positions in macro products, any positive news could trigger aggressive short covering.” (Jin10)