Goldman Sachs Sees Largest Net Buying Since 2020 Amid Market Reversal

Hedge funds underwent their largest deleveraging in over three years last week, but the markets quickly reversed course after better-than-expected earnings reports from Microsoft and Amazon.

The S&P 500 rose approximately 1% for the full week, with calm on the surface but turbulence beneath. Goldman Sachs' trading desk recorded its largest net buying since November 2020, driven almost entirely by short covering.

The reversal occurred between Wednesday and Thursday, when the Federal Reserve's meeting outcome turned hawkish and markets quickly reversed sharply. The momentum factor GSPRHIMO jumped 13% in one day, marking its largest single-day gain in over a decade.

Short covering outpaced long-side selling at a ratio of 1.3:1, with the most notable short covering observed in technology, small-cap, and financial sector ETFs. U.S. equities recorded their largest weekly net inflows since November 2020 last week, driven almost entirely by short covering.