Be careful! The trend of “smart money” in US stocks has changed

Jinshi Data · 07/01 09:57

Last week, Goldman Sachs's main brokerage division pointed out that hedge funds have sold big net technology stocks in the past month, mainly semiconductor stocks, including Nvidia. In June, the net sales volume of hedge funds in the US stock TMT sector will set the biggest record for Goldman Sachs's main brokerage business.

A few days later, Goldman Sachs once again pointed out that the sell-off of these “smart money” has spread from technology stocks to almost all stocks, even though technology stocks are still at the “top of the list” to be sold.

Goldman Sachs data shows that hedge funds are reducing their risk exposure by closing long positions and making up to a lesser extent from short positions. The total leverage ratio for long and short declined for the sixth week in a row, while the net leverage ratio fell to 53%, the biggest drop this year, indicating that hedge funds have become more cautious. Traffic data shows that hedge funds have been net selling US stocks for the third week in a row, mainly driven by long liquidation.

Goldman Sachs pointed out that out of the 11 major US stock sectors, 8 were net sold, mainly in the information technology, consumer goods, real estate, and finance sectors, while the industrial, materials, and energy sectors saw net purchases.

However, after 6 weeks of net sales of the materials sector in the past 7 weeks, hedge funds began to net buy the sector at the fastest speed in 5 months. Among them, long buys faster than short sales, with a ratio of about 5 to 1. Almost all sub-sectors (with the exception of containers and packaging) achieved net purchases, with chemicals and metals and mining leading the way.

However, unlike hedge funds, retail investors continue to pour into the “Big Seven” even though the former is being sold as quietly as possible.

Vanda Research notes that while hedge funds are quietly “fleeing” technology stocks, retail investors continue to pour into semiconductor stocks, particularly Nvidia.

It's hard to come to the conclusion that hedge funds are losing large amounts of technology stocks to retail investors. Under the calm surface of the market, there may have been a large number of stock swaps, and hedge funds may be selling record amounts of technology stocks to retail investors.

As a result, Vanda warns that this is still an area worth paying close attention to as it could become a source of future instability, and hedge funds are doing their best to get ahead of this “instability.”