Goldman Sachs: Tech Stocks Face Their Largest Sell-Off in a Decade

According to潮向 Research, Goldman Sachs’ August 3 position tracking report showed that last week saw the largest net short selling of global information technology stocks since 2014, with two consecutive days of selling totaling the second-highest level in nearly a decade. Hedge funds have reversed half of their year-to-date leverage gains, and net leverage has turned negative for the year. Retail margin balances in South Korea and Japan, after reaching historical extremes, have begun to reverse, while U.S. retail investors are also reducing holdings in semiconductor stocks. The speculative net short position in VIX futures has been largely unwound. Goldman Sachs believes the intensity of deleveraging may have peaked, but outflow momentum continues. Implied volatility for individual stocks has risen to its highest level since 2020, while index correlation has fallen to low levels, as the market shifts from broad AI sector trading toward differentiated pricing of individual stocks. Bond funds and money market funds have been the primary recipients of capital inflows this year; equity funds saw $34 billion in inflows in July, significantly smaller in absolute terms than bond market inflows. Goldman Sachs assesses that the environment for stock selection is improving, but sector beta trades still face pressure.