Global hedge funds accelerated their exit from US electric and water utility stocks last week, marking the fastest pace of sales in two months, while heavily investing in US materials stocks, according to a report by Reuters citing a recent note from the prime brokerage desk at Goldman Sachs.

The note highlights that utilities stocks — excluding gas utilities — are now one of the most sold sectors in November. Despite the Dow Jones Utility Index gaining over 3% last week and climbing more than 20% year-to-date in 2024, hedge funds have been shedding positions across electric and water utilities.

In contrast, US materials stocks emerged as the most net-bought sector on Goldman Sachs’ trading desk last week. The buying spree extended across the sector, with particular focus on chemicals, metals and mining, as well as paper and forest products.

An S&P index tracking materials stocks rose by 1% last week and has gained over 9% in 2024. Hedge funds have consistently shown interest in materials, making it one of the most net-bought sectors in three of the past four weeks, according to Goldman Sachs.

This rotation reflects a shift in hedge fund strategy, as investors reposition portfolios in response to changing market dynamics. Materials stocks, often tied to global growth and industrial demand, may be benefiting from expectations of economic resilience or infrastructure investment. Meanwhile, utilities, traditionally considered defensive assets, could be losing appeal in an environment where risk-on sentiment prevails.