Hedge funds increased exposure to global industrials last week while trimming US equity positions, as renewed US-China trade tensions and a government shutdown triggered the sharpest US market sell-off since April, according to a report by Reuters citing client notes from Goldman Sachs.
For the first time in seven weeks, hedge funds held net short positions in US equities, reflecting a cautious stance toward American markets. The shift came as the S&P 500 fell 2.8% over the five trading days to 10 October.
Goldman’s research desk noted that managers were primarily shorting major US indices – likely as a hedge – while maintaining selective long bets in individual names.
At the same time, hedge funds were net buyers of industrial stocks globally, adding the largest volumes in six weeks. The move marks the second consecutive week of inflows into the sector, focused on companies tied to transport, defence, and energy.
European markets saw the most significant buying activity, followed by developed Asia, while US industrial names were largely avoided. Trading volumes in the sector reached five-year highs, Goldman said.
Sub-sectors attracting capital included electrical equipment, machinery, commercial services, aerospace and defence, and airlines.
