A report from Goldman showed hedge funds sold industrial stocks last week at the fastest pace since last December, while continuing to buy energy stocks for the fourth week in a row. The report said hedge funds sold shares of companies that provide professional services, ground transportation, machinery and air freight, despite a small buying of air transport and defence stocks.
Hedge funds' shift from industrial to energy stocks suggests they are betting on which economic sectors may benefit from expected Fed rate cuts. Paul O'Neill, chief investment officer at wealth management firm Bentley Reid, said: "If the Fed manages a soft landing and global growth is better than expected, that could be why these hedge funds are changing their stance."
Meanwhile, hedge funds continued to buy shares of energy companies. The energy sector was the biggest net buyer of stocks in Goldman's US equity index, with hedge funds buying oil, gas and consumable fuel, as well as energy equipment and supplies for the fourth week in a row, the report said. It also said hedge funds' exposure to energy stocks is at its highest level in years.
Analysts said the bets also reflected the so-called "Trump trade". Investors who bet on Mr Trump winning the November election have increased their exposure to energy companies, believing they could benefit from a loosening of the regulatory environment if Mr Trump returns to the White House.