Short ETFs and the fear index are both soaring! Goldman Sachs exposes the “fake calm” of US stocks, revealing the market is actually extremely fragile.

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The US stock market is undergoing an abnormal "false prosperity."

On March 8th, Goldman Sachs’ sales and trading team released a research report pointing out that although there is a constant flow of geopolitical headlines and the S&P 500 index appears relatively stable, internal market pricing logic has issued a clear warning.

Goldman's liquidity analysis expert Lee Coppersmith bluntly pointed out: "The market stress indicated by panic signals is much heavier than what the news headlines suggest."

The "Scissor Difference" Between Panic Signals and Index Performance

Looking at historical data, since 1950, increased geopolitical risks have typically triggered about a 4% weekly decline in the S&P 500, and the market usually recovers to pre-fluctuation levels within a month.

This time, the US stock index's decline (-3.4%) is still within a controllable range, but the problem lies in "internal pressure."

Goldman's "US Vol Panic Index" closed at 9.72 on Friday. This shows that although the market appears not to have collapsed, tolerance for bad news has dropped to rock bottom.

Coppersmith warns: "Beneath the relatively calm surface of the indices, market trading exhibits extremely high fragility. Once bad news appears, risk exposure will expand rapidly."

Investors: Increasing hedging while refusing to reduce positions

Current defensive strategies in the market reflect a contradictory mentality: everyone is buying insurance, but has no plans to retreat.

Goldman Sachs data show that US stocks have been in net selling status for three consecutive weeks, mainly driven by hedging demand. The most prominent sign is that positions in US short-selling ETFs surged 8.3% in a single week, the largest increase since the "Tariff Liberation Day," and the second largest in the past five years.

Investors are massively increasing short positions in corporate bonds, energy, small-cap, and large-cap ETFs. However, this hedging behavior has not translated into substantial risk exposure adjustments.

Goldman Sachs data show that overall market leverage only slightly declined to 307.4%, still at the 99th percentile of the past five years; net leverage dropped by just 1 point to 79.2%. This means investors have only added a protective layer around existing positions, rather than truly "de-risking."

The Crowded "AI Cabin"

Currently, market leadership is extremely concentrated, which in itself is the biggest systemic risk.

Goldman Sachs PB (Prime Brokerage) position data show net exposure to "medium- and long-term momentum factors" has pushed up to 55%-60% of fund equity positions, a multi-year high. This means all market money is betting on the same style of winners.

This crowding acts as propulsion during gains, but turns disastrous when cracks in leadership appear.

In fact, such turbulence has already begun to manifest in hedge fund performance. From February 27 to March 5, Goldman Sachs' Fundamental L/S portfolio is estimated to have fallen 3.22%, the worst performance since June 2022.

The market’s “violent rotation” also confirms this: since the start of the year, leading sectors such as copper mining, memory chips, and metals have been heavily sold off, while previously neglected “high-risk software” and “high-risk AI” sectors have instead rebounded. This is a classic factor-driven shakeout.

Relying on AI-Driven "Profit Engines"

Ultimately, the US stock market's profit engine remains highly dependent on those few tech giants.

In 2025, Amazon, Broadcom, Google, Meta, Microsoft, Micron, and Nvidia—these seven AI-related stocks—will contribute about half of S&P 500 earnings per share (EPS) growth. In 2026, this trend is predicted to continue, with Nvidia alone expected to account for 24% of total earnings growth.

As analyzed by Goldman Sachs, the current macro turbulence may quickly dissipate like other historical geopolitical conflicts. But the core problem lies in the fact that, due to high investor leverage, extremely crowded positions, and a profit engine overly reliant on a single track, this "fragile balance" may be disrupted at any time.

Coppersmith concludes: "Unless positions become more diversified or leadership picks up again, market volatility will be much higher than what the headline indices suggest."

Risk warning and DisclaimerThe market carries risks, and investment should be approached with caution. This article does not constitute personal investment advice, nor does it take into account individual users' specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investment is at your own risk. ```