Last week, hedge funds bet on a rise in stocks, anticipating a ceasefire in Iran, according to two client notes from Goldman Sachs dated Saturday and reviewed by Reuters on Monday.
These bets were made just before global markets were shaken on Monday by the threat of the United States to impose a blockade on Iranian maritime transportation.
On Friday, the majority of hedge funds’ stock transactions were long for the first time in eight weeks, as hedge funds abandoned their short positions to take long bets, as shown in Goldman’s notes.
A short position anticipates a decline in asset prices, while a long position anticipates a rise.
Here are the key insights from the two Goldman notes:
– Systematic hedge funds, such as CTAs (commodity trading advisors), are expected to buy S&P 500 stocks for an estimated $40 billion this month.
– Traders who only take long positions have returned to markets “after being on the sidelines since the beginning of the war.”
– While broader macro-cover positions have turned long, hedge funds remained short on individual stocks.
– Hedge funds have sold the most tech stocks in five years.
– Software accounted for 60% of sales.
– Stocks were bought worldwide, with Europe and Asian emerging markets leading in terms of dollars.
– Hedge funds specializing in stock selection saw a 4% return during the week ending last Friday.
