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Hedge funds cut US equity exposure ahead of Trump tariffs

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Hedge funds aggressively sold off US equities for a fifth consecutive week last week, anticipating market turbulence ahead of President Donald Trump’s new tariff measures, according to a report by Bloomberg citing data from Goldman Sachs’ prime brokerage unit.

As concerns grew over Trump’s plans to impose 25% tariffs on Canadian and Mexican imports, alongside rising competition from China’s AI powerhouse DeepSeek, hedge funds ramped up short positions in single stocks while selling long macro products, positioning themselves defensively.

Their caution appears well-placed—S&P 500 futures slid 1.7% early on Monday, following a 1% decline last week in the cash index. Goldman Sachs’ Chief Equity Strategist, David Kostin, warned that US equities could slump as much as 5% if the tariffs remain in effect.

Hedge funds net sold nine of 11 S&P 500 sectors, with healthcare and real estate being the only sectors to see inflows. The biggest sell-offs occurred in consumer discretionary, industrials, financials, energy, communication services, and information technology, according to Goldman’s data.

While professional speculators moved out of equities, retail investors took the opposite approach, betting that Trump wouldn’t follow through on policies that could destabilise markets. Retail traders poured $2.1bn into US stocks on Friday, according to Emma Wu, JPMorgan’s Global Quantitative and Derivatives Strategist. An inflow of this scale has only happened nine times in the past three years, with five of those instances occurring in 2025 alone.

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