Goldman Sachs warns that it is not advisable to short the US stocks at this stage as the selling pressure is nearing an end. Positive news may trigger a short squeeze situation.

Amid escalating geopolitical risks and significant market volatility, Goldman Sachs trading department has issued a warning, advising investors not to rashly turn bearish on US stocks, as the current market structure is more likely to trigger a "squeeze" rally when positive news emerges. From the market performance perspective, the S&P 500 index is heading towards its worst monthly performance since 2022, while the Nasdaq has entered a technical correction zone. Although Goldman Sachs does not see a clear path for short-term upward movement, its trading team believes that the selling pressure is nearing completion, and increasing short positions in this context carries significant risks. According to Goldman Sachs strategy team's report, the market needs to maintain hedging and flexibility, but "given the sensitivity of the current position structure to squeeze risk, it is not advisable to switch to a short position." Data shows that trend-following funds (CTAs) have sold approximately $55 billion worth of US stocks this month, with the current net short position reaching $18.4 billion. Goldman Sachs believes that unless there is a new macro shock, this round of systemic selling "is nearing completion," and the market risk-reward structure is gradually tilting upwards. Meanwhile, risk parity and volatility control strategies continue to reduce stock exposure, with risk parity strategies globally cutting more than $20 billion, about one-sixth of their total long positions. However, from a fund perspective, there is no apparent "retreat" in the market. Inflows into equity funds remain stable, with retail investors showing little significant decrease in their stock holdings, and fundamental investors maintaining close to historical high positions. This means that once positive news such as geopolitical tensions easing emerges, the market could see an amplified rebound. On the geopolitical front, the recent US and Israeli strikes on multiple Iranian nuclear facilities and steel targets, coupled with Iran's ongoing retaliation in the Persian Gulf region and refusal to comply with US President Trump's ceasefire request, have further increased market uncertainty. Additionally, Goldman Sachs expects pension funds to bring in about $14 billion in net inflows to US stocks at the end of the month, providing some support to the market. Furthermore, retail investors have only slightly reduced their stock allocations by about 1% from the peak, showing that their long-term confidence in US stocks remains. Goldman Sachs points out that while short-term uncertainties persist, with the gradual release of end-of-month fund flows, the market could see a clearer path of operation after April.