Goldman Sachs recently issued a warning indicating that the recent US stock market selloff is likely not over yet, based on analysis from their trading desk.
The key points from their note primarily via Bloomberg; US stocks rebounded late last week (Friday), nearly recovering from a sharp mid-week decline, but conditions remain choppy. Trend-following algorithmic funds specifically Commodity Trading Advisers, or CTAs — systematic strategies that trade based on price momentum rather than fundamentals have already been triggered to sell due to the S&P 500 breaching short-term levels.
Goldman expects these funds to stay net sellers over the coming week, potentially regardless of short-term market direction. A renewed decline could prompt about $33 billion in additional selling of US equities this week.
If selling pressure persists and the S&P 500 falls below 6,707, it could unlock up to $80 billion in further systematic selling over the next month. Goldman’s proprietary Panic Index which tracks factors like one-month S&P implied volatility and VIX-related measures surged to 9.22 last week — approaching “max fear” levels — signaling elevated investor stress and thin liquidity, which could amplify volatility.
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Traders advised investors to “buckle up” for potential continued turbulence. This warning appears tied to a volatile period in early February 2026, including a tech/AI-related selloff earlier in the month that hit hedge funds and crowded trades hard.
Broader 2026 outlooks from Goldman Sachs Research issued earlier in January had been more constructive overall — forecasting solid global growth ~2.8%, US outperformance, and ~11% potential returns for global equities over the next 12 months — but this trading desk update highlights near-term tactical risks from momentum-driven flows.
Markets can shift quickly, so this reflects sentiment and positioning as of early February 2026 rather than a definitive long-term call. Investors are watching key S&P levels closely for confirmation of whether the selling intensifies or stabilizes.
Goldman Sachs’ warning about the ongoing market selloff has particularly significant implications for tech stocks, which have been at the epicenter of the recent volatility in early February 2026. The selloff was primarily triggered by fears of AI disruption to traditional software and tech business models, sparked by Anthropic’s release of an advanced AI automation tool.
This led to a sharp rotation out of tech into more defensive sectors like consumer staples. Goldman Sachs highlighted that software stocks entered a bear market, with their proprietary basket losing around $2 trillion from 2025 highs roughly a 30% drop. Many names saw massive declines: Oracle and Salesforce down ~27%.
Others like ServiceNow, Workday, SAP, and newer IPOs; Figma down 41% YTD. The iShares Expanded Tech-Software Sector ETF (IGV) dropped over 12-13% in recent sessions and entered oversold territory. The Nasdaq Composite saw sharp declines early in the month down ~1.6% on some days, with multi-day routs, underperforming the S&P 500.
The S&P 500 tech sector (.SPLRCT) and software services index faced steep losses before partial rebounds. Magnificent 7 and AI-related names: While not all details specify uniform hits, the group lagged amid concerns over massive AI capex and disruption risks.
Hedge funds reduced exposure to megacaps, and crowded trades unwound. Goldman noted hedge funds focused on tech/telecom/media suffered their worst days in nearly a year down up to 2.78% in a session. Trend-following CTAs (already selling after S&P breaches) could add $33 billion in equity sales with up to $80 billion more over the next month if S&P 500 drops below ~6,707.
Tech’s high weighting in indices means it bears much of this pressure. Markets saw a sharp rebound with the S&P 500 up ~2%, Nasdaq gaining, and tech/software clawing back. This extended into early the following week for some gains, as the pullback was viewed as oversold and overdone by some.
However, Goldman’s trading desk emphasized the selloff isn’t over yet — CTAs remain net sellers near-term (regardless of direction), liquidity is thin, and their Panic Index hit near “max fear” levels (9.22).
Volatility could persist or intensify if key levels break, with tech vulnerable due to its momentum-driven nature and ongoing AI uncertainty. While a tactical bounce is possible; some analysts see counter-trend rallies in oversold software, the near-term risk skews toward more turbulence for tech stocks if systematic flows accelerate.
Broader rotation to “real economy” sectors continues, but tech’s leadership could return if disruption fears ease or earnings prove resilient. Watch S&P levels closely — especially around 6,707 — for signals of escalation.