Goldman Warns of Extreme U.S. Stock Rebound Potential as AI Spending Fears and Short Covering Take Focus

Goldman Sachs’ prime brokerage data show hedge funds holding long positions in individual U.S. stocks while hedging through ETFs and index futures, with macro short positions at their highest since September 2022. This does not reflect broad-based bearishness, but a response to risks surrounding AI capital spending, corporate credit and the war in the Middle East. The more crowded these positions become, the greater the chance that short-covering will amplify gains once negative catalysts fade.

A March 12, 2026, report cited Goldman executive John Flood as saying positive catalysts could trigger a short-term gain of 2%–3% in U.S. stock indexes. On March 9, the S&P 500 fell 1.5% in early trading before closing 0.8% higher after Trump said the war with Iran would end soon. Hedge funds’ gross exposure reached a record 307%, while top-of-book futures market depth stood at just $4 million, well below the $14 million average.