Goldman Sachs Links Thursday's U.S. Stock Reversal to Extreme Hedging Activity

Goldman Sachs partner John Flood said on Nov. 21 that Thursday's dramatic U.S. equity reversal stemmed from defensive positioning as Nvidia's record earnings failed to ease risk concerns, BlockBeats reports. The S&P 500 surged 1.9% in the opening hour before turning negative by 1 p.m., marking its largest intraday swing since April and erasing over $2 trillion in market value, while the VIX jumped above 26. Goldman's trading desk recorded surging short activity across ETFs, custom baskets, and futures as investors focused on hedging crowded risks. Historical data since 1957 show eight instances where the S&P 500 opened up more than 1% but closed lower, with such reversals followed by average gains of at least 2.3% the next day and week, and 4.7% over the subsequent month.