Hedge Funds Signal Major Shift in US Equities Selling Trend

In a significant reversal of recent trends, hedge funds have been offloading US equities at a rate unseen since early January, signaling a notable shift in investment behavior following five consecutive weeks of net buying.

Goldman Sachs' prime brokerage report highlights this change in momentum, attributing it to recent positive economic growth indicators and a firm stance from the Federal Reserve, hinting at prolonged elevated interest rates.

Both macro products, encompassing indexes and ETFs, and single stocks have witnessed net selling, according to the report. This marks the first instance in six weeks that macro products experienced net sales, while single stocks recorded their third consecutive week of net sales, reaching the highest notional net sales observed this year.

The sell-off has been widespread across all 11 US sectors for the week ending May 24. Leading the downturn were industrials, information technology, financials, energy, materials, and real estate. Of particular note, the cyclical sectors bore the brunt, facing the most substantial notional net sales since December.

The industrial sector, comprising machinery, ground transportation, professional services, and passenger airlines, bore the maximum impact, enduring net sales for 11 consecutive sessions. This sector observed the most significant amount of net sales over any two-week period in over a decade.