A rapid unwind of bearish positions is driving the stock market’s sharp rally,
with a Goldman Sachs basket of most-shorted stocks surging over 13% this week
and outperforming the S&P 500 by 9 percentage points. As optimism grows that the
Iran conflict’s worst phase may be over, investors have covered about $93
billion in short positions this month, adding momentum to gains of more than 9%
in major indexes. Strategists said institutional buying and short covering are
key drivers, with risk appetite rising across speculative segments. However, the
rebound is uneven and some warn investors may be overinterpreting the rally as
an all-clear signal.
