Hedge funds are unwinding short positions against US stocks at the fastest pace since the 2020 market rebound, according to Goldman Sachs Group Inc. trading data. The covering accelerated late Tuesday following President Donald Trump's announcement of a temporary ceasefire deal in his conflict with Iran. This surge in short covering volume signals a dramatic shift in market sentiment.

Goldman Sachs' trading desk division reported that managers sharply increased their unwinding of macro product shorts, including major indexes and exchange-traded funds. The volume of this activity is approaching levels last seen during the early pandemic recovery period. The timing suggests traders are betting on reduced geopolitical tensions and a more stable market environment.

The rapid short covering reflects growing optimism among institutional investors about US equities. As hedge funds rush to close bearish positions, the move could provide additional fuel for a potential market rally. The pace of this unwinding represents one of the most significant shifts in trading strategy since the pandemic-era market volatility, indicating a fundamental change in how large investors view current market conditions.