The U.S. stock market is experiencing a rare wave of simultaneous selling by both institutional and retail investors, leading to a sharp deterioration in market sentiment.
On March 20, Goldman Sachs trading desk data showed that on March 20, pure long funds had a net sell of stocks amounting to $9.6 billion in a single day, setting a record high since the bank began tracking this data in 2022, which Goldman Sachs characterized as a &#34;5 standard deviation event.&#34;
At the same time, JP Morgan data indicated that retail investor inflows fell by 15% week-on-week, plummeting a cumulative 43% since the outbreak of the Iran war, with the &#34;buying on dips&#34; strategy facing an unprecedented crisis of confidence.
The backdrop of this selling storm is the ongoing turmoil in the Middle East. High oil prices, a lack of market direction, and a reassessment of AI's massive capital expenditures have collectively suppressed investors' risk appetite. Goldman Sachs warned that as the end of the fourth quarter approaches and the gamma exposure of traders worsens after options expiration, any downward reversal will be amplified by negative gamma effects, leaving the market with room to digest more panic.
<h2>Historic Sell-off: Long Funds Set Record for Single-Day Net Sales</h2>
Goldman Sachs trading desk data showed that on March 20, pure long funds had a net sell of $9.6 billion, surpassing the previous record of $8.8 billion set on July 31, 2025, becoming the largest single-day net sell in the bank's data history. Goldman Sachs classified it as a &#34;5 standard deviation event.&#34;
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This sell-off was widespread, affecting all sectors, with the technology, media and telecommunications (TMT), consumer, and industrial sectors showing the most significant selling bias. Goldman Sachs trader Mike Washington noted that overall activity reached a score of 7 out of 10 on that day, a noticeable increase from the previous days' low activity, with the final trading results skewed towards selling by 15% compared to the 30-day average.
In contrast to pure long funds, hedge funds had a slight net buy of $750 million that day, with buying mainly coming from scattered replenishment demands in macro products, alternative assets, and healthcare sectors.
<h2>Market Structure: Hedge Unwinding Triggers &#34;Capital Cleansing&#34;</h2>
This large-scale sell-off is not an isolated event but rather a concentrated release of previously accumulated structural pressures in the market. Charlie McElligott from Nomura Securities previously pointed out that institutional investors' liquidation of S&amp;P 500 futures was nearing historical records, and ETF short positions were also close to historical highs, indicating that Wall Street had excessively hedged against significant risk avoidance scenarios.
However, this excessive hedging created a &#34;most distorted scenario&#34;: the stock market oscillated sideways rather than crashing, leading to unfulfilled downside hedges, forcing investors to continuously bear the costs of hedging. As high volatility mechanically compressed positions, hedge positions were gradually unwound, and the resulting Delta replenishment provided a supportive floor for the market, creating a paradox of &#34;the more it falls, the more people buy.&#34;
This week, the VIX and S&amp;P 500 futures showed a divergence in trends—volatility significantly decreased while stocks accelerated their de-risking, ultimately evolving into a centralized &#34;capital cleansing&#34; on the morning of March 20. During the session, the stock market briefly fell nearly 1%, but after comments from Israeli Prime Minister Benjamin Netanyahu, a strong rebound occurred in the closing hours, resulting in a slight decline.
<h2>Retail Investor Retreat: A 43% Decline Behind the Erosion of Wealth Effect</h2>
The turmoil at the institutional level has also spread to the retail market. According to JP Morgan's weekly retail radar report, as of the week ending March 18, retail fund inflows dropped to $5.7 billion, below the 12-month average of $7 billion per week. ETF purchases decreased by approximately 22% week-on-week, while single-stock purchases remained around 45% of historical percentiles over the past year. Since the outbreak of the Iran war, total retail investment has cumulatively declined by 43%.
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JP Morgan attributes this trend to two mutually reinforcing factors: first, high oil prices and the market's daily directionless volatility have suppressed risk appetite; second, the profit and loss situation of retail investment portfolios is deteriorating—despite still being positive year-to-date, they have given back some of the early gains since the outbreak of the conflict, leading to a noticeable weakening of the wealth effect.
Citing historical experiences from the post-pandemic inflation period in 2022, JP Morgan noted that persistently rising gasoline prices and CPI have eroded the growth of retail trading portfolios, leading to a significant slowdown in trading activity, which only gradually resumed after inflation stabilized from its peak.
Despite the overall cautious sentiment, the thematic allocation logic at the individual stock level for retail investors has not fundamentally changed. AI data centers and electrification-related targets remain the main buying direction. Notably, the relative trading volume of bullish options in the energy sector has shown a significant rebound, with retail investors positioning themselves in oil-sensitive stocks ahead of institutions, contrasting with behavior patterns during the Russia-Ukraine conflict. JP Morgan pointed out that during significant oil supply shocks, the historical correlation between the S&amp;P 500 and oil prices tends to weaken and eventually turn negative, reflecting the impact of margin pressure and tightening financial conditions.
<h2>The Game of Negative Gamma Risk and Ceasefire Expectations</h2>
Goldman Sachs holds a cautious outlook for the market. The bank's derivatives traders noted that traders are currently in a gamma short position, and any downward movement will further deepen short exposure. Goldman Sachs estimates that if the market drops by 1.5%, traders' gamma exposure will expand to approximately $5 billion short, with the impact of quarter-end rebalancing expected to exceed the quadruple witching expiration effect this Friday.
On the geopolitical front, Goldman Sachs cited market patterns during the Russia-Ukraine conflict to remind investors: news of ceasefire negotiations is often the first major catalyst, but history shows that the day after such news is typically a time to reduce positions on rallies, rather than a signal to chase prices. Rich Privorotsky, head of Goldman Sachs Delta One, pointed out that whether Iran allows the U.S. to find a political exit or continues to exert soft pressure through the Strait of Hormuz will be a key variable determining the market direction.
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Given that the stock market still has room to digest more panic sentiment, Goldman Sachs currently prefers to hold a short Delta structure and put spread combination on the S&amp;P 500 or NASDAQ 100

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.IXIC

Goldman Sachs trading desk data shows that pure long funds had a net stock sell-off of up to $9.6 billion in a single day, setting a historical record since the bank began recording in 2022; meanwhile, JP Morgan data indicates that retail investor inflows this week fell by 15% compared to the previous week, plummeting a cumulative 43% since the outbreak of the Iran war, and the "buying on dips" strategy is facing an unprecedented crisis of confidence

- The U.S. stock market is experiencing a rare sell-off as both institutional and retail investors retreat, significantly worsening market sentiment.  
- On March 20, Goldman Sachs reported that pure long funds had a record net sell of $9.6 billion in a single day, classified as a "five standard deviation event."  
- Concurrently, retail inflows fell 15% week-over-week, contributing to a total decline of 43% since the onset of the Iran conflict, as heightened oil prices and market volatility dampen risk appetite.

Wallstreetcn

The storm has arrived! Bullish funds sell at a record high, and retail trading volume has plummeted by 43% since the conflict