Hedge funds have moved back to a net long position on US equities for the first time since the Iran ceasefire, signalling renewed confidence in risk assets amid a broader global market rally, according to a report by Reuters citing notes from Goldman Sachs.
The shift comes as the S&P 500 trades at record highs, supported by strong corporate earnings and continued momentum in artificial intelligence-related stocks.
According to Goldman Sachs prime brokerage data, hedge funds increased gross leverage to a five-year high last week, reflecting a significant rise in overall market exposure and risk appetite.
The bank said global equities were net bought across both single stocks and index-level instruments, with call option activity also surging as traders increased exposure to upside market moves through derivatives.
Asian equities saw particularly strong inflows, marking the largest monthly buying activity in a month, while overall allocations to both emerging and developed Asian markets reached record levels since Goldman began tracking the data.
Sector positioning showed a clear risk-on bias, with financials — including banks and insurers — among the most actively bought areas. However, despite recent inflows, hedge fund exposure to financials remains near five-year lows.
Funds were broadly positioned for gains across most sectors, with the notable exceptions of energy and healthcare, which were the only areas seeing net bearish positioning.
The shift in sentiment follows a period of heightened geopolitical volatility linked to conflict in the Middle East. Goldman noted that market behaviour during the recent Iran conflict bore similarities to past crisis-driven selloffs, including the 2023 banking stress episode and tariff-related volatility.
Despite short-term fluctuations, analysts observed that rebounds from recent market lows have tended to be stronger and longer-lasting than initially expected.
