US Equity Trading Update

According to a report from Goldman Sachs, hedge funds (HFs) net sold US equities last week, mainly influenced by risk-on flows. The ratio of short sales to long buys was notable at 2 to 1.

This selling trend was predominantly in macro products, such as indexes and exchange-traded funds (ETFs), accounting for roughly 50% of the net sales.

In a reversal from the previous week’s covering, US-listed ETF shorts rose by +5.6%, particularly in Sector, Credit, and International ETFs.

This change in investor behavior led to net sales of single stocks for the first time in seven weeks, with short sales exceeding long buys at a ratio of 1.5 to 1.

The sectors experiencing the most selling on a notional basis included Information Technology, Communication Services, and Materials, whereas Health Care and Consumer Discretionary saw net buying activity.

The report also indicated that HFs maintained their interest in US Financials, marking the second consecutive week of net buying in this sector. The gross trading activity in US Financials reached a notable high, standing in the 100th percentile over a five-year period. The sector's gross and net allocations now represent 12.7% and 11.5% of total US exposure, respectively.

Health Care emerged as the most net bought sector last week, with buying activity concentrated in Pharmaceuticals, Health Care Equipment & Supplies, and Health Care Providers & Services, outweighing sell-offs in Biotechnology and Life Sciences Tools & Services.

Goldman Sachs notes that US Health Care has been net bought in 7 of the last 8 weeks, with the sector's long/short ratio currently at 2.46, ranking in the 92nd percentile compared to the past year and in the 46th percentile over the past five years.