The massive deleveraging in July and the sell-off in tech stocks just ended, but market sentiment quickly reversed in early August.

A new report from Goldman Sachs shows that investors are rapidly rebuilding risk exposure, with demand for call options surging to historic highs, signaling the market has entered a self-reinforcing positive feedback loop where "buying begets more buying" driven by position covering. Goldman Sachs liquidity strategist Lee Coppersmith stated bluntly: "July was a reset of positions, and now investors are using all of August to chase the market's rebound."

Data reveals that trading volume for S&P 500 Index (SPX) call options exceeded 4 million contracts on Tuesday, setting a new single-day record. Meanwhile, the SPX put/call skew recorded its steepest two-day decline in nearly a decade, reflecting a sharp surge in demand for upside risk exposure.

More notably, the S&P 500 Index rose 179 basis points on that day, while the options market had only priced in about ±40 basis points of movement, meaning the actual gain was more than four times the implied volatility range. Goldman Sachs noted that the last time a similar event occurred was in December 2016.

Fundamentals and Macro Environment Align, Making the "Chase" Logic Hard to Disprove

Coppersmith believes this round of position rebuilding is not merely driven by sentiment but results from the combined improvement in earnings, the economy, and liquidity conditions.

At the corporate level, this earnings season has once again confirmed that profit growth continues to exceed expectations. Major cloud computing vendors are raising capital expenditure, and several companies are proving that AI investments are gradually translating into revenue growth, commercial capabilities, and higher returns on capital. The AI investment narrative is shifting from "spending" to "realization."

On the macro front, U.S. economic data also provides support. The Atlanta Fed's GDPNow model recently upgraded its estimate for U.S. third-quarter GDP growth to nearly 6%, just days after the Federal Reserve decided to keep interest rates unchanged. Coppersmith believes this forms a highly supportive combination: the economy is re-accelerating, corporate earnings are improving, and the risk of further monetary tightening has temporarily subsided.

At the same time, falling volatility in oil prices and interest rates has further weakened the incentive for investors to maintain low positions, accelerating the return of funds that had previously undergone massive outflows.

Positions Still Light, the "More Anxious to Chase" Effect Is Taking Shape

Despite the market's consecutive rebound, Goldman Sachs believes the current position structure remains favorable for further gains in risk assets.

Coppersmith pointed out that after one of the largest tech stock de-positions in the past decade, it is clearly premature to conclude that investors have fully returned to the market after just two trading days.

On the contrary, the price increase itself raises the psychological threshold for re-entering positions, making it increasingly difficult for sidelined capital to wait for a pullback. This creates a classic "more anxious to chase" dynamic, where each rally further intensifies the pressure on investors to add positions.

This sign is already evident in trading activity.

Goldman Sachs' trading desk reports that during the first two trading days of August, client demand for index beta exposure was exceptionally strong, and almost entirely focused on the bullish direction. At the same time, the market has seen a rare combination of "Spot Up, Vol Up" (spot prices rising while implied volatility is also rising) for two consecutive days. This suggests that investors are not taking profits during the rally but are instead continuously buying new upside protection and leveraged exposure, a phenomenon that is historically uncommon.

Goldman Sachs Maintains Bullish View on South Korea: The Most Cost-Effective Way to Play AI Hardware Recovery

Beyond U.S. stocks, Goldman Sachs also highlights the South Korean market as one of the most attractive opportunities for a catch-up rally.

Coppersmith notes that the Korea Composite Stock Price Index (KOSPI) currently trades at a forward price-to-earnings ratio of about 4.7 times, its lowest level since 2001, and even below the global financial crisis period. Meanwhile, the market's return on equity (ROE) remains near 25%, creating a stark contrast between valuation and profitability.

From a fundamental perspective, the memory industry cycle is still improving. Goldman Sachs expects DRAM prices to continue posting double-digit sequential growth, with strong demand for high-bandwidth memory (HBM) and long-term supply agreements locking in new capacity.

After experiencing historic corrections and record selling, Goldman Sachs believes the South Korean market may be the most direct and cost-effective option to gain exposure to the AI hardware cycle recovery at a low valuation.