Hedge funds have ramped up bearish bets on US stocks at the fastest pace since 2020, reinforcing expectations of further market declines, according to a report by Reuters citing a client note from the prime brokerage division at Goldman Sachs.
Rather than pulling back entirely though, hedge funds increased short positions more aggressively than long ones in March, as the S&P 500 dropped nearly 5%. In contrast, global stocks excluding the US are on track for their strongest first-quarter performance since 2019, rising 8% so far.
Hedge funds executed their fastest equity sell-off in four years during the first week of March, dumping stocks over a 48-hour window as the S&P 500 fell 3.1%, marking its worst weekly performance in six months.
The Federal Reserve’s downward revision of US economic growth and increased inflation projections, coupled with uncertainty surrounding President Donald Trump’s trade tariffs, have further pressured market sentiment.
Hedge funds have notably cut exposure to tech and media stocks, bringing allocations to a five-year low. Some funds have initiated short positions on AI-related companies, while tech-focused hedge funds have posted negative 4.1% returns in March. Meanwhile, healthcare-focused funds are down 1.5%, according to Goldman Sachs.
The bearish stance on US equities is not mirrored in European and Asian markets, where hedge funds have exited losing trades without re-entering.
Despite broader market volatility, systematic hedge funds –which use algorithmic and quantitative strategies – have thrived, posting 8.9% gains year-to-date.
Meanwhile, global stock-picking funds have started to recover, gaining 1.5% in 2025 after suffering their worst two-week stretch since May 2022.
