Goldman Sachs: Hedge funds have been net selling US stocks for eight consecutive weeks, with index and ETF net sales driven by short selling

On Monday, Goldman Sachs stated in its latest report that, according to its brokerage business data, hedge funds' selling of US stocks is the most intense in six weeks. They continue to reduce net long positions in individual stocks and increase short positions in ETFs at the fastest pace in a year. Hedge funds have now been net selling US stocks for eight consecutive weeks.

In terms of products, Goldman Sachs pointed out:

• Macro products such as indices and ETFs account for approximately 40% of net sales, with this part of the sales being entirely driven by short selling. ETF short positions saw the largest increase since August 2023, with small-cap stocks, corporate bonds, and industry ETFs being the most heavily shorted.
• Individual stocks account for approximately 60% of net sales, with the dominant selling force being long positions selling more than short positions covering.

By industry:

• Information technology has seen the largest net selling intensity to date. The sector has seen the largest net sales volume in five weeks, with 9 out of the past 11 weeks being net sales. Software, semiconductors, and semiconductor equipment are the sub-industries with the largest net sales volume.
• Other industries with significant nominal net selling volume include industrials, healthcare, and materials.
• Meanwhile, non-essential consumer goods, communication services, finance, and energy are the industries with the largest net buying volume.

On the same day, Tony Pasquariello, global head of hedge funds at Goldman Sachs, stated that as the US stock market decline widens, investors should hedge their risk exposure even if they hold quality assets. "Sometimes you need to accelerate, sometimes you need to brake. I tend to reduce exposure and adjust the exercise prices of options."

Pasquariello also mentioned that it is hard to imagine August as one of the months when investors should take on significant portfolio risks. With investors currently holding overweight long positions, Pasquariello expressed caution. He will focus on systematic trading such as CTA.

On the other hand, Pasquariello believes that corporate buybacks should be meaningful in August. "I think the next month will be a balancing process, without any clear deviations."

Despite warning about risks, if one has to choose between going long on quality assets while hedging and further reducing core portfolio risks, Pasquariello said he would lean towards the former. "For me, this is a tricky decision because I tend to think of this as a pullback in still a decent environment, which is different from the beginning of something more serious and lasting."

On Monday, driven by the negative news of Warren Buffett cutting Apple holdings and NVIDIA delaying new chip deliveries over the weekend, the US stock market continued its selling trend from last week, plunging into panic. The three major US indices all opened lower, with the Nasdaq falling by 6.35% and the S&P 500 dropping by 4.09% in early trading. NVIDIA plummeted 14% intraday, Apple fell by over 9%, and Tesla dropped by over 10%.

An article on the Wall Street News website previously mentioned that last week, Goldman Sachs' institutional brokerage data showed that recently, "smart money" has been fleeing US stocks and flowing into stock markets in China and other emerging markets in Asia. As of last Friday, hedge funds saw net buying of Chinese stocks for the first time in three weeks and recorded the largest net buying volume in two months