Goldman says the stock market is undergoing its biggest short-term pressure in 25 years – and hedge funds have plunged equity exposure at the fastest rate since 2009.

• According to Goldman Sachs, the U.S. stock market had the largest short-term in 25 years over a three-month period.
• The highlight of this came last week when hedge funds withdrew from the market at the fastest rate since 2009.
• Day traders have gained GameStop and other heavily shorted stocks over the past few weeks, costing short sellers billions.
• Sign on here for our daily newsletter, 10 things before the opening clock.

According to Goldman Sachs, the US stock market has experienced its biggest short pressure in 25 years in the last three months.

It came to a halt last week amid the GameStop frenzy that forced hedge funds to dump the shares at the fastest rate since 2009, the firm found.

GameStop shares rose 400% last week alone – and 1,625% for the whole of January – by increasing hedge funds and others holding the stock and costing them billions of dollars. A short position is a bet that a share price will fall. Estimates from data provider Ortex showed on Friday that short sellers have so far had a loss of about $ 19 billion on GameStop in 2021 alone.

The boom in GameStop and other heavily shortened stocks was driven by users of the Reddit forum Wall Street Bets, who forced the prize to make their money, but also to hammer hedge funds like Melvin Capital. They had to buy shares in companies like GameStop and AMC to close their short positions and sell other shares to cover their losses.

Read more: Buy these 26 stocks with a short circuit as retailers cause wild rallies in Wall Street’s less appropriate names, Wells Fargo says.

The activity was the culmination of a three-month period in which the mandate of most US equities rose by 98%, far exceeding the aggressive pressure seen in 2000 and 2009.

“Funds in their coverage have sold long positions and shorts in every sector,” said David Kostin, Goldman’s major U.S. equity strategy.

Kostin and his colleagues said that regulations, limits imposed by trading platforms, or sharp losses could bring the amateur frenzy to a standstill.

“Otherwise, an abundance of American household cash should fuel the trade boom,” they said.

Goldman said retail investment is booming because of the large amount of savings built up during the coronavirus period, as well as government stimulus.

“During 2020, credit card debt decreased by more than 10%, and deposits grew by $ 4 billion and savings by $ 5 billion,” investment bank analysts said.

“In addition to these savings, our economists expect more than $ 1 trillion in fiscal support in the coming months, including another round of direct checks.”

Read more: Jefferies says these 20 stocks with a very short short and light trading could see big jumps if there is a GameStop-like push.