MW Why a $33 billion stock market buying spree is now winding down

By Barbara Kollmeyer

The recent rally was 'a bit much,' says trading desk

Goldman Sachs trading desk warns the recent stock rally is "a bit much."

A huge wave of mechanical buying by a group of Wall Street investors scrambling to get back into the market has likely peaked, possibly a headwind for the S&P 500 going forward.

That's according to the Goldman Sachs trading desk, which sent a warning to clients on Friday after the index SPX soared to its seventh record of the year. "[Friday's] leg higher in the S&P 500 is starting to feel like a bit much," wrote John Flood, head of Americas Equities Execution Services at Goldman Sachs.

U.S. stock futures (ES00) indicated a pullback from that high on Monday, with oil (CL.1) (BRN00) climbing as Iran reversed its decision to reopen the Strait of Hormuz on Saturday.

Flood explained that CTAs, which are systematic funds that focus on trading futures contracts, have now accumulated $10 billion in bets the S&P 500 will go higher. In a big wave of buying last week, they picked up $33 billion worth of S&P 500 futures and are set to buy another $23 billion this week, he said.

But that lower buying figure for this week means the "highest velocity demand" from those CTAs is now behind the market, he said.

Flood also said flagged some issues with hedge funds that are using a ton of borrowed money to bet on markets right now. He cited the total amount they have invested, or gross leverage, at 310% or in the 92nd percentile for one year and 98th over five years. But that's as net leverage, the difference between their bullish and bearish bets - is around the 75th percentile - meaning they aren't abandoning bets the market will fall.

Nomura strategist Charlie McElligott has also spent weeks talking about a dearth of investors willing to bet on markets rising. Last week, he said the scramble for those investors to get into the market could keep pushing it up.

The Goldman trader said the stock rally can continue a bit longer, though as hedge funds transition from covering bearish bets on the stock market to buying single names that they have conviction on.

"From my client conversations it feels like there is still real belief in another leg higher in AI...most focus on energy / industrials / hardware suppliers," he said. That interest has focused on LNG players and companies like engineering, installation and maintenance services provider Legence $(LGN)$, and tech names Applied Materials $(AMAT)$ and Marvell Technologies $(MRVL)$, he said.

Non-AI interest by clients is focused on the healthcare side, and some buying back of beaten-down software names. Big investors such as mutual and pension funds are "still highly concentrated in supercap tech," he said.

-Barbara Kollmeyer

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April 20, 2026 06:03 ET (10:03 GMT)

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