Goldman: Hedge funds pile into US stock rally at fastest pace in 2 years

A recent Goldman Sachs report states that hedge funds entered the US equity market last week at the fastest pace in two years, as market participants generally believed that the Fed’s current rate hike cycle was over and hedge funds invested money in US equities that were in a correction phase, causing US equities to rally sharply in early November.

FILE PHOTO: A screen displays the trading information for Goldman Sachs on the floor of the NYSE in New YorkFILE PHOTO: A screen displays the trading information for Goldman Sachs on the floor of the NYSE in New York

Goldman Sachs' Prime Brokerage trading division stated in a recent report that hedge funds around the world aggressively bought shares of the U.S. stock market in the week ending Nov. 3, marking the largest buying in five days since December 2021.

Goldman Sachs said in a report that this has put some cautious hedge fund traders in a dilemma, because as stock prices rise, the cost of short positions once taken becomes too expensive to continue holding.

Goldman Sachs said many traders ran into trouble trying to escape crowded short positions, leading to rapid portfolio losses. Long positions expect the share price to continue to rise, while short positions expect the share price to fall.

As of this Monday, $S&P 500(.SPX)$ had risen for six consecutive trading days and $NASDAQ(.IXIC)$ show a 7-day rise.

  • Goldman Sachs said hedge funds’ long positions in the U.S. information technology sector reached their highest level in eight months.

  • Data shows that U.S. stock bulls, including some speculators, tend to be long on large technology companies, including software technology companies.

  • Goldman Sachs reported that they are also bullish on consumer discretionary companies such as restaurants and fashion, which provide products and services that people are keen to buy but are not consumer staples.

  • Goldman Sachs also reported a net sell-off in healthcare and financial stocks.

The recent wave of selling has sharply lowered the overall valuations of large technology companies, but valuations remain high, and some more cautious investors appear reluctant to pay for these stocks as future expansion is less certain.

According to Keith Lerner, co-chief investment officer of Truist Advisory Services, the performance pressure faced by large technology companies indicates that the adjustment period of the $S&P 500(.SPX)$ is nearing an end, laying an important foundation for the outstanding performance in the last two months of this year, while historical data This shows that these two months are often the best time for US stocks to perform.
Capital Group, an asset management giant with $2.3 trillion in assets under management, believes that the Federal Reserve's decision to keep interest rates unchanged, signaling the end of its aggressive tightening cycle, has created opportunities for investors to buy global stocks.


How would you trade November’s opportunities?

Are there any promising investment targets?

# Macro Trend

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