Hedge Funds Shift Strategy with Major US Equities Sell-Off I

In a notable shift, hedge funds recently divested from US equities at a rate not witnessed since early January, signaling a significant change in investment behavior following five consecutive weeks of net buying.

Goldman Sachs' prime brokerage report highlighted this momentum reversal, attributing it to recent positive economic growth indicators and a firm stance from the Federal Reserve, suggesting prolonged elevated interest rates.

Both macro products, such as indexes and ETFs, and single stocks experienced net selling, marking the first time in six weeks for macro products and the third consecutive week for single stocks. Notably, single stocks saw the highest notional net selling observed this year.

The selling activity was broad-based across all 11 US sectors for the week ending May 24, with industrials, information technology, financials, energy, materials, and real estate leading the downturn. Cyclical sectors, in particular, faced significant notional net sales since December.

The industrial sector bore the brunt, witnessing net sales for 11 consecutive sessions. This sector, encompassing machinery, ground transportation, professional services, and passenger airlines, experienced the most substantial net sales over any two-week period in over a decade.

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