Goldman Sachs traders warn: The market correction is not over yet, and CTA strategies still have nearly $100 billion in selling pressure to be released over the next month.

Goldman Sachs traders warn: The market correction is not over yet, and CTA strategies still have nearly $100 billion in selling pressure to be released over the next month.

The U.S. stock market adjustment has not yet bottomed out, and mechanical selling pressure continues to build. The latest assessment from Goldman Sachs’ derivatives and trading team indicates that although internal market positioning has undergone a significant reset, the process of systematic strategies deleveraging is not yet complete. Coupled with continuously deteriorating macro conditions, the market is currently in a “more balanced but still fragile” state.

According to Goldman Sachs’ calculations, CTA and trend-following strategies sold about $50 billion in global equities over the past week, but the selling pressure is far from fully released—about $69 to $70 billion is expected to be sold in the next week, and $98 to $100 billion over the next month, meaning U.S. equities will face considerable impact.

Meanwhile, the Goldman Sachs Global Financial Conditions Index (GS Global FCI) has tightened by more than 50 basis points over the past two weeks, marking the strongest tightening since August 2023. Several previously theoretical downside risks are quickly materializing.

Goldman Sachs Sales and Trading Managing Director Lee Coppersmith pointed out that surging oil prices, non-farm payroll data missing expectations, a roughly 5% drop in equities, and localized stress signals within the private credit market, while individually insufficient to end the current cycle, are cumulatively pushing the market into a more fragile operating range.

Goldman Sachs’ Chief Derivatives Trader Brian Garrett also warned that under a negative gamma environment, the market faces a “spot decline and volatility surge” tail scenario, and the margin of safety should not be overestimated.

CTA Selling Pressure Remains, Systematic Deleveraging Still Underway

Over the past month, systematic strategies have sold a total of about $80 billion in global equities, with CTA and trend-following funds being the main sellers this past week.

Goldman Sachs estimates that CTAs alone net sold about $50 billion in the past week, but by their model, subsequent selling pressure remains considerable: about $69 to $70 billion in the next week, about $98 to $100 billion in the next month, with U.S. stocks, due to their negative trend signals, bearing the main share of this selling.

Meanwhile, non-dealer held U.S. equity futures positions decreased by about $29 billion last week, dropping from about $300 billion at the beginning of the year to about $240 billion. Investors overall remain net long, but the rapid pace of deleveraging indicates substantial active risk reduction is already occurring.

Short positions in U.S.-listed ETFs rose 12.4% last week, marking the third largest weekly increase since Goldman Sachs began tracking in 2016, exceeded only by April 2025’s reciprocal tariffs and March 2020’s COVID shock periods. By prime account market value, macro product short exposure has risen to its highest level since September 2022, in the 97th percentile of the past five years.

Macro Shocks Combine, Downside Scenarios Quantifiable

Coppersmith noted that the most significant market development in the past two weeks is not the geopolitical events themselves, but the rapid tightening of global financial conditions. The GS Global FCI rose more than 50 basis points in two weeks, the strongest since August 2023, and rare outside crisis periods.

Goldman Sachs’ research team continues to emphasize that the distribution of equity outcomes is increasingly skewed to the downside. High valuations, rising geopolitical risks, and tightening financial conditions together increase the probability of significant drawdowns. If the market begins pricing in substantial worsening of economic prospects, the S&P 500 may fall another 5% toward 6300, corresponding with multiples compressing to about 19 times earnings.

Historical precedents for oil shocks are also worth attention. Looking back to the major oil supply shocks in 1974, 1980, 1990, and 2022, the median S&P 500 decline during periods of soaring oil prices was about 12%, with peak-to-trough drawdown medians near 23%.

Goldman Sachs also points out that the current U.S. energy economy sensitivity is lower than in those historical periods, and domestic energy output has significantly increased, reducing structural vulnerabilities.

Options Expiration and OPEX Are Key Time Points

This week, the market faces multiple overlapping technical options events. According to SpotGamma’s analysis, this Friday (March 20), Triple Witching OPEX will involve about $1.3 trillion in nominal delta exposure, about 30% of total market exposure. Dealer repositioning post-expiration will significantly impact market direction.

Another critical structural factor is the JPM Collar position. This quarter’s Collar involves 35,000 SPX contracts, specifically a 5470/6475 put spread combined with a 7155 strike covered call, expiring March 31.

SpotGamma expects dealer rehedging after JPM Collar expiration will have a clear market impact, making the March 31 quarterly expiration a key window for options-driven abnormal volatility.

Meanwhile, this week’s Fed FOMC meeting (March 18) will also serve as an independent market catalyst. Garrett concluded that in an environment dominated by negative gamma, high skew, and multiple upcoming expiries, the previously narrow trading range regime is gone—this week is one of the most technically complex periods in recent months.

Strategy Adjustment: Defensive Shift, Betting on Stagflation Portfolios

At the sector rotation level, Goldman Sachs observes that capital flows and hedge fund positions are concentrating in sectors that historically outperformed during oil shocks and stagflation environments.

Energy and healthcare are favored, while Goldman Sachs Hedge Fund VIP basket stocks have recently declined about 6%. U.S. hedge fund average returns year-to-date are roughly -3%.

Based on these judgments, Goldman Sachs sales and trading team highlights their newly adjusted stagflation hedge portfolio (GSPUSTAG Index):

Long basket (GSXUSTGL) is composed of commodity stocks and historically defensive compound growth stocks that have performed well in stagflation scenarios;

Short basket (GSXUSTGS) includes low-quality discretionary, semiconductors and hardware, consumer finance and regional banks, cyclicals highly sensitive to oil prices, and overvalued tech.

Conclusion: Repricing Halfway Done, Macro Trend Sets the Future

Goldman Sachs’ overall judgement is that this round of repositioning is halfway through—leverage down, macro shorts surge, systematic longs reduced, futures positions shrink, volatility buyers return, multiple adjustments underway.

However, whether the macro shocks that triggered this reset have stabilized remains the key unknown.

If oil prices stabilize and credit market stress remains controllable, recent risk-off moves may create a market bottom. But if high oil prices continue to feed into inflation, credit, and growth expectations, the downside scenario being discussed now will gradually shift from tail risk to base case.

Risk DisclaimerThe market carries risk, and investment requires caution. This article does not constitute individual investment advice and has not considered any user’s specific investment goals, financial situation, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their own circumstances. Investing accordingly is at your own risk.