Last week, hedge funds shifted their focus from global stocks to placing bets on market declines just before U.S. President Trump's announcement of tariffs that triggered a global market downturn.
Following Trump's tariff announcements on Canada, Mexico, and China, global shares plummeted, sparking concerns about a potential trade war that could hinder international economic growth.
According to a note from Goldman Sachs released on Friday and revealed by Reuters on Monday, hedge funds sold off their stock holdings in all regions except for developed markets in Asia.
This selling spree, the largest since , was reminiscent of a stock market crash in the past that originated from unwinding yen carry trades and impacted U.S. tech stocks, as reported by the bank.
Hedge funds took bearish positions across all sectors, with industrial, consumer discretionary, energy, and communications services stocks experiencing the most significant sell-offs.
Goldman data showed that short positions on industrial stocks nearly doubled compared to long positions, indicating a strong negative sentiment toward this sector.
Contrarily, hedge funds placed bullish bets on real estate stocks, which saw a consistent increase over the last four weeks, reaching the highest pace in two months.
Hedge funds were keen on various real estate sectors, such as residential, retail, and health care, attributing their interest to the potential resilience of real estate assets amidst inflationary environments.
Bruno Schneller, managing director at Erlen Capital Management, highlighted that real estate could serve as a hedge against inflation and increasing import costs during trade disputes, making it an appealing investment option.