Short positions in U. S.-listed exchange-traded funds (ETFs) experienced a notable surge last week, climbing by 8.3%, according to data from the Goldman Sachs Prime Trading Desk. This represents the most substantial weekly increase since Liberation Day and the second-largest jump observed in the past five years. The surge suggests a considerable rise in hedging activities within the market.
The increase in short positions reflects growing anxiety among market participants, particularly in light of the ongoing Middle East war, which began last week with airstrikes on Iran by the U. S. and Israel. Despite relative stability in the U. S. stock market, underlying fear appears to be intensifying. This is also reflected in the VIX Index (CBOE Volatility Index), Wall Street's leading volatility gauge, which has surged to its highest level since last year's tariff shock.
According to Goldman Sachs, corporate bond, energy, small-cap equity, and large-cap equity ETFs were among the most shorted during the trading week ending March 5. While U. S. equities experienced net selling for the third consecutive week, driven by both short and long sales in macro products, this was partially offset by long buys and short covers in single stocks.
Despite single stocks collectively experiencing net buying, seven out of eleven sectors saw net selling, driven by continued disposals across cyclicals and broad-based de-grossing in Technology, Media, and Telecommunications (TMT) stocks, led by short covering in software stocks. The rise in short positions highlights a cautious sentiment among investors as they navigate geopolitical uncertainties and sector-specific concerns.
