After weeks of buying, Wall Street’s pros are flipping the script.
Last week, hedge funds cashed in gains post-Fed meeting and started piling into short bets — targeting large caps first.
ETF short-selling (i.e. betting against the market) jumped 8% in the week ending 19 December, the biggest weekly surge since April 2020, led by large-cap stock ETFs, according to Goldman Sachs’ Prime Brokerage.
In fact, hedge funds net sold US stocks at the fastest pace in seven months last week, unloading financials, tech and staples in droves.
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Where’s the money flowing?
Communications services, industrials, and health care were the most net bought sectors, according to the report. That wasn’t enough to keep US stocks afloat though, with the S&P 500 down 2% last week.
And this was not an Uncle Sam problem. Stocks globally were also net sold for the first time in three weeks, at the fastest pace in seven months. Add in short positions still open, and short selling in global stocks just hit its highest level in over 10 years.
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No safe havens
North America led the sell-off, followed by Asia’s developed markets, according to Goldman.
All 11 global sectors saw a jump in short sales, with financials, consumer discretionary, energy and real estate the most net sold. Even financials, which surged after Donald Trump’s November win, became the most net-sold sector globally.
Banks and consumer finance stocks still saw some buying, but heavy selling in capital markets, insurance, and financial services crushed the iShares Global Financials ETF, which dropped 4% for the week.
Despite the market churn, Yardeni Research President Ed Yardeni and Chief Markets Strategist Eric Wallerstein say a 10% pullback might be on the cards — but view it as a dip-buying chance, not a reason to panic.
No recession, no bear market, they insist.
Edited by Azar Zaidi and Ankush Chibber. If you have any tips, ideas or feedback, please get in touch: talk-to-us@moniify.com
