Short positioning in U.S. macro products has climbed to its highest level in more than three years, raising the risk that markets could move sharply higher if investors are forced to unwind bearish bets.
Data from Goldman Sachs shows short exposure across U.S. macro products — including index and ETF positions — has surged in recent weeks. As a share of total gross market value in the bank’s Prime Book, short positioning now stands at its highest level since September 2022 and ranks in the 93rd percentile over the past five years.
The buildup of bearish positions has left markets vulnerable to sudden moves if sentiment shifts. Goldman Sachs traders, including Ariana Contessa, say the current environment could amplify volatility as positioning becomes increasingly crowded.
“This market has proven it has the ability to move violently in both directions with dealers short gamma right now,” Contessa wrote.
Short gamma conditions mean market makers may need to chase price moves, which can accelerate both rallies and selloffs. In the current setup, Goldman believes the greater risk may lie on the upside if negative positioning begins to unwind.
“However, right tail (squeeze) risk at the index level is primed to be the most extreme,” Contessa added.
Some early signs of that dynamic may already be appearing. Goldman pointed to recent market reactions to more positive headlines around oil markets and developments tied to the Iran conflict, which helped spark buying pressure.
Hedge fund positioning is also contributing to the setup. According to Goldman, gross leverage among hedge funds is close to record levels, largely driven by continued shorting and hedging through macro products such as index futures and ETFs.
“Hedge funds’ gross leverage is essentially at an all-time high driven by continued shorting (hedging) via macro products,” Contessa said.
