MW There's a clear path for U.S. stocks to rise next month after institutional deleveraging, say Goldman analysts

By Steve Goldstein

There's a clear path for U.S. stocks to rise next month, if geopolitical events cooperate, say Goldman Sachs analysts.

There's a clean path for U.S. stocks next month to advance after massive institutional deleveraging, according to a report from Goldman Sachs trading desk team.

The S&P 500 SPX has retreated 5.8% so far this month, its worst monthly performance since Dec. 2022, following the U.S. and Israeli invasion of Iran, and Iran's subsequent attacks on energy infrastructure.

Goldman analysts Gail Hafif, Brian Garrett and Lee Coopersmith say investors must be hedged for geopolitical developments but, urged them not to short the market given the big selling from professional investors.

"This market requires investors to stay hedged and nimble as new information hits the tape, but we caution against flipping short as current positioning is prone to squeeze risk amid potential resolution headlines," they said.

They pointed out momentum-chasing commodity trading advisers sold nearly $55 billion worth of U.S. equities since the start of March, as asset managers reduced their S&P 500 positioning by $51 billion over the last three weeks. Risk parity funds, which allocate depending on the risk of each asset class, shed one-sixth of their length, the analysts said.

The CTAs have sold so much there's not much left to sell - they're short $18.4 billion worth of U.S. equities - barring a major shock. Positive news could trigger big snapbacks from this cohort, as much as $86 billion over the next month if there's a sustained rally.

The funds that adjust for volatility, meanwhile, will likely continue to deleverage but "with small impact," they said.

Dealer hedging is moving from a "short gamma" environment that mutes market moves to the upside and exacerbates those to the downside, to a "long gamma" environment that keeps the market more restricted in both directions, they added.

U.S. households, by contrast, have only reduced their equity allocation by 1% from the peak.

"If there were any questions of who is buying these dips, they have most certainly been answered. While institutional clients have been de-grossing, retail has piled dollars into passive funds rapidly closing the gap between active and passive flows," they said.

-Steve Goldstein

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March 27, 2026 05:28 ET (09:28 GMT)

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