Hedge funds have significantly increased their short positions against U.S. shares and emerging market stocks in Asia, while simultaneously wagering on the rise of European shares, according to a Goldman Sachs note. This shift contributed to global stock selling reaching its highest level since April 2023, marking the fifth consecutive week of net selling by speculators. A short position profits when prices decline.
Global shares experienced a third consecutive week of decline, coinciding with rising bond yields fuelled by concerns that the conflict in the Middle East may sustain upward pressure on oil prices and trigger further inflation. Goldman Sachs reported that both index-tracking products, such as ETFs, and individual stocks were net sold during this period. Most global sectors saw more selling than buying, particularly in consumer discretionary, technology, and financials.
Consumer staples and energy stocks were the only sectors where hedge funds held long positions, anticipating price increases. Conversely, hedge funds reduced long positions and increased short positions in emerging markets within Asia. Despite these market trends, hedge fund stock pickers saw a marginal performance increase of 0.47% between March 13 and March 19, benefiting from their long bets, although they remain down 3.85% for March and up 0.16% year-to-date.
Systematic stock traders capitalised on short bets, achieving a year-to-date gain of just over 6%. Gross leverage, an indicator of hedge fund trading activity, decreased to 309.8% for the week. Goldman Sachs is a leading global investment banking, securities, and investment management firm that provides a wide range of financial services to a substantial and diversified client base.
