HEDGE FLOW Hedge funds dump banks, buy the dip in consumer staples, Goldman Sachs says
Wall Street's march to record highs could be put to the test this week as major banks start to report second-quarter earnings and June's consumer price data for the U.S. is published on Tuesday.
Hedge funds fled long positions in U.S. banks and global financial services companies for the second week in a row last week, data from Goldman Sachs prime brokerage desk showed.
A long position expects an asset price to rise, whereas a short position bets it will fall.
The cohort ditched long positions and added short positions on European financial stocks, said Goldman.
Banks, financial services firms and insurance companies were all net sold while those in trading and consumer finance were net bought, said the investment bank.
Meanwhile, speculators last week piled into the worst performing U.S. stock sector, consumer staples, the data showed.
Consumer staples include products like beverages, food and tobacco which are often relatively shielded in economic downturns because they are essential items.
The hedge fund buying comes as analysts expect these next set of quarterly reports to reveal the impact of U.S. President Donald Trump's tariffs on corporate balance sheets and the wider economy.
"If the tariffs snap back higher on August 1, and we then get an underwhelming jobs report, that would easily resurrect fears around a U.S. recession," said Deutsche Bank analyst Henry Allen.
Consumer staples has been the most net-bought stock sector at the Goldman Sachs prime brokerage desk in July, Goldman said.
Global hedge funds trading stock markets systematically are down 1.8% for the month but still up just over 10% for the year. Stock pickers, largely flat for the month so far, have posted a 6.6% return this year.
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