The U.S. stock market is experiencing an unusual &#34;false prosperity.&#34;
On March 8, Goldman Sachs' sales and trading team released a research report stating that despite frequent geopolitical headlines, the volatility of the S&amp;P 500 index appears relatively stable, but the pricing logic within the market has issued clear warnings.
Goldman Sachs liquidity analyst Lee Coppersmith bluntly pointed out: &#34;The market pressure indicated by panic signals is far heavier than what the news headlines suggest.&#34;
<h2>The &#34;Scissors Gap&#34; Between Panic Signals and Index Performance</h2>
Historical data shows that since 1950, an increase in geopolitical risks typically triggers a weekly decline of about 4% in the S&amp;P 500, and the market usually recovers to pre-fluctuation levels within a month.
The current decline in the U.S. stock index (-3.4%) is still within a controllable range, but the problem lies in the &#34;internal pressure.&#34;
Goldman's &#34;U.S. Vol Panic Index&#34; closed at 9.72 on Friday. This indicates that although the market does not appear to be collapsing, its tolerance for bad news has dropped to a freezing point.
Coppersmith warned: &#34;Beneath the relatively calm index facade, market trading exhibits extreme fragility, and once bad news emerges, risk exposure will rapidly expand.&#34;
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/83c735d0-f697-4e52-be67-03059135b94a.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/83c735d0-f697-4e52-be67-03059135b94a.png"/>
<h2>Investors: Increasing Hedging While Refusing to Reduce Positions</h2>
The current defensive strategy in the market reflects a contradictory mindset: everyone is buying insurance but does not intend to retreat.
Goldman Sachs data shows that U.S. stocks have seen net selling for three consecutive weeks, primarily driven by hedging demand. The most significant sign is that short positions in U.S. stock ETFs surged by 8.3% in a single week, marking the largest increase since &#34;Tariff Liberation Day&#34; and the second-largest increase in the past five years.
Investors are massively increasing short positions in corporate bonds, energy, small-cap stocks, and large-cap stock ETFs. However, this hedging behavior has not translated into substantial adjustments in risk exposure.
Goldman Sachs data indicates that the total market leverage ratio has only slightly decreased to 307.4%, still at a historically high percentile of 99% over the past five years; the net leverage ratio has only dropped by 1 point to 79.2%. This means that investors are merely adding a layer of protection around their existing positions rather than genuinely &#34;de-risking.&#34;
<h2>Crowded &#34;AI Cabin&#34;</h2>
The current market leadership is extremely concentrated, which in itself is the biggest systemic risk.
Goldman Sachs' PB (Prime Brokerage) holding data shows that the net exposure to the &#34;medium to long-term momentum factor&#34; has risen to 55%-60% of fund equity positions, reaching a multi-year high. This means that all the money in the market is riding on the same style of winners.
This crowding acts as a thrust during upward movements, but it becomes a disaster when leadership shows cracks.
In fact, this turbulence has already begun to reflect in hedge fund performance. From February 27 to March 5, Goldman Sachs' Fundamental Long/Short portfolio is estimated to have declined by 3.22%, marking the worst performance since June 2022
The market's &#34;violent rotation&#34; also confirms this: the copper, storage chip, and metal sectors that have led the gains this year have been severely sold off, while the previously neglected &#34;high-risk software&#34; and &#34;high-risk AI&#34; sectors have rebounded. This is a typical factor disassembly-style washout.
<h2>AI-Driven &#34;Profit Engine&#34;</h2>
Ultimately, the profit engine of the U.S. stock market still heavily relies on a few tech giants.
By 2025, seven AI-related stocks—Amazon, Broadcom, Google, Meta, Microsoft, Micron, and Nvidia—are expected to contribute about half of the S&amp;P 500's earnings per share (EPS) growth. This trend is expected to continue into 2026, with Nvidia alone projected to contribute 24% of total profit growth.
As Goldman Sachs has analyzed, the current macro shocks may dissipate as quickly as other historical geopolitical conflicts. However, the core issue is that due to high investor leverage, extremely crowded positions, and an over-reliance on a single track for the profit engine, this &#34;fragile balance&#34; could be broken at any time.
Cooper Smith summarized: &#34;Market volatility will be much greater than it appears in the major indices until positions become more diversified or leadership accelerates again.&#34;

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Despite the limited pullback of the S&P under geopolitical shocks, Goldman Sachs' flow of funds experts warn that panic within the U.S. stock market has already boiled over, with an extremely fragile market structure hidden beneath the "false calm." The current volatility panic index is soaring, and short ETF positions have reached one of the largest increases in five years. The market's total leverage ratio is at the historical 99th percentile, with positions extremely crowded and highly reliant on the profit engines of AI giants

- The U.S. stock market is experiencing an unusual "false prosperity" despite geopolitical tensions, with warnings of internal pricing vulnerabilities.  
- Goldman Sachs analysts note that while the S&P 500's decline appears manageable, market stress signals suggest a precarious situation, compounded by concentrated positions in tech stocks.  
- High leverage and a fragile balance among investors mean that volatility may exceed that indicated by the index, posing risks if adverse news breaks.

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Shorting ETFs and the fear index are soaring! Goldman Sachs exposes the "false calm" of the U.S. stock market, which is actually extremely fragile