Hedge funds loaded up on US equities at the fastest pace in nearly two months last week, positioning portfolios for an expected Federal Reserve rate cut in September, according to a report by Reuters citing a client note from Goldman Sachs.
Managers increased exposure to indices and cyclical stocks tied to economic growth, while shedding defensive positions in healthcare, consumer staples and utilities – the biggest sector rotation out of defensives in four months. Utilities, often used as a proxy for rate trades, saw particularly heavy selling.
The shift comes as investors assign an 85% probability to a 25bp cut at next month’s FOMC meeting, with Fed Chair Jerome Powell set to offer further guidance at the upcoming Jackson Hole symposium.
Goldman added that financials were modestly net sold, but saw the sharpest rise in gross trading activity since late 2024, suggesting hedge funds are actively recalibrating exposure. Flows were positive across most regions, with the exception of Europe.
