Hedge funds sell US equities at fastest pace in three months, says Goldman

Investing.com -- Hedge funds significantly reduced their exposure to U.S. equities last week, marking the fastest pace of net selling in three months, according to a report from Goldman Sachs.

The investment bank said this was driven by short sales across both single stocks and macro products, with the notional short-selling volume reaching its highest levels since September 2023.

“Eight of 11 sectors were net sold on the week,” Goldman Sachs analysts wrote, citing Financials , Healthcare, and Consumer Discretionary as the most offloaded sectors. Meanwhile, Materials, Information Technology, and Staples were the only sectors to see net buying.

Despite the selloff by hedge funds, long-only funds and other hedge funds were net buyers, adding $6 billion and $2.5 billion, respectively.

Demand was said to be strongest in Consumer Discretionary and Staples, each seeing $2 billion in inflows, followed by Energy and Financials, which each gained $1 billion.

Information Technology and Communication Services faced the heaviest outflows, with $2 billion in net selling for each sector.

Goldman noted that the equity market remained buoyed by positive earnings reports and signs of a resilient U.S. consumer. Broader market indices recorded gains, with the Russell 2000 up 4.5%, the Nasdaq 100 up 1.9%, and the S&P 500 gaining 1.7% during the week.

In the derivatives market, Goldman Sachs highlighted increased demand for financials-related options, particularly in the Financial Select Sector SPDR Fund (NYSE:XLF ).

“The call wing has gone bid from upside demand,” the analysts noted, recommending call spreads as a strategy.

Goldman Sachs also observed shifts in exchange-traded funds (ETFs), particularly in semiconductors, where investors have reduced their holdings by $350 million over the past month.

They explained that this trend was largely influenced by varying levels of exposure to Nvidia (NASDAQ:NVDA ) within popular ETFs.

The activity underscores the continued volatility and sector rotation shaping the current U.S. equity landscape.

Source: Investing.com