Global hedge funds have been accelerating their purchases of U.S. stocks at an unprecedented rate, according to Goldman Sachs (NYSE:GS). During the week ending Sunday, November 5, 2023, these funds embarked on a significant five-day buying spree of U.S. equities, which has not been seen since December 2021.
This buying frenzy has paralleled the events of December 2021, as reported by Goldman’s prime brokerage trading desk. The surge in purchases led to a squeeze, making short positions untenable due to soaring stock prices. This resulted in numerous investors facing losses as they attempted to withdraw from overcrowded trades.
The major U.S. stock market indexes experienced a multi-session rally, recording the highest one-week percentage gains of 2023 to date. Long positions in information technology stocks taken by hedge funds reached an eight-month peak. Speculators have been leaning towards tech and consumer discretionary companies such as restaurants and fashion labels.
Meanwhile, health care and financial stocks were net sold. North America became the main focus of hedge fund buying activity, whereas Europe and Asia, excluding Japan, saw predominant net short positions.
The swift acquisition of U.S. stocks by hedge funds is reportedly driven by expectations of a sustained pause in central bank rates. This development marks a significant shift in hedge fund activity that has not been observed for nearly two years.
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