Breaking late at night! Goldman Sachs internal report leaked: Wall Street is rushing to buy, this wave of "smart money" is flowing into financial stocks, while industrial stocks' short positions have already triggered full alert

Do you know? Goldman Sachs just announced that hedge funds' buying speed of U.S. stocks last week hit a six-month high. It wasn't just casual buying; there was net buying, with both long positions building and short covering happening simultaneously, involving indices and ETFs.

I looked at the data carefully: The short positions in U.S.-listed ETFs have shrunk for the second consecutive week, down 0.6% week-over-week. The net leverage ratio of longs and shorts soared to 55.3%, reaching nearly the 89th percentile in almost a year. The fundamental long-short ratio also increased by 1.4 percentage points, now at the 99th percentile—almost the highest level seen since the industry began.

Don't get too excited yet. In late May, these hedge funds were still hiding in their shells, taking profits from semiconductors and heavily accumulating macro short positions. Now they suddenly shifted, with the S&P 500 rising nine weeks in a row, and the Nasdaq 100 up over 20% so far this year. Market sentiment is heating up; everyone is betting on AI infrastructure spending exceeding expectations, and earnings season is still looking decent.

Where is the money flowing? Financial stocks are the top target, with net buying reaching a six-month high. Goldman Sachs calculated that the ratio of longs bought to shorts sold is nearly 6.5 to 1. The most popular are payment stocks, followed by banks, while some are selling off consumer finance and capital markets. Interestingly, despite the massive inflow of funds, the overall allocation to financial stocks remains at the 1st percentile of the past five years—seriously underweighted.

Industrial stocks are a completely different story. Over the past eight weeks, seven weeks have seen net selling, with short exposure soaring to the 90th percentile over the past year. Since February, the selling mainly came from new short positions, not from long positions being withdrawn. In other words, some are aggressively buying banks and insurance while simultaneously shorting industrial giants.

This position signal is very straightforward: the market is extremely pessimistic about financial stocks (seriously underweighted), so the influx of funds creates a huge combined force; industrial stocks are already crowded with shorts, and if economic data surprises to the upside, a short squeeze could be very intense.

See, Wall Street’s playbook is always like this—being greedy where others are fearful, and secretly shorting where others are greedy.

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