Goldman Sachs executives believe that there is a potential for "extreme" gains in the US stock market.

Goldman Sachs trading desk said that hedge funds' positioning in US stocks has created conditions for a sharp rebound in the stock market after recent fluctuations. Speculative investors mostly continue to hold long positions in individual stocks, while also hedging by taking short positions in exchange-traded funds and index futures. Data from Goldman Sachs' prime brokerage team shows that the current short position exposure has reached its highest level since September 2022. John Flood, head of Goldman Sachs' Americas equities execution services and partner, said this dynamic reflects the market's efforts to cope with the uncertainty brought by the Iran conflict, credit risks, and concerns about artificial intelligence. However, if positive news prompts investors to close their positions, it could also drive a significant market rally. "If there is news of the conflict ending, the indices could spike significantly," Flood said in an interview, "potentially rising 2% to 3% in a straight line, with most of the gains coming from short covering in macroeconomic products."