Looking at trades made through Goldman Sachs’ brokerage division, analysts said the recent U.S. market decline was driven by a broad sell-off in macro products. This includes index funds and exchange-traded funds, driven almost entirely by short selling.
The actions in Wall Street ended Wednesday’s session sharply lower, led by a 3.6% drop in the Nasdaq Composite, after Tesla and Alphabet’s results disappointed the market and will cause investors to flee to safer assets.
The Dow Jones Industrial Average ended the session down 504.22 points, or 1.3%, at 39,853.87. The S&P 500 ended down 128.61 points, or 2.3%, at 5,427.13. It was its worst day in percentage terms since Dec. 15, 2022. And the Nasdaq Composite was the biggest loser of the day, dropping 654.94 points, or 3.6%, to 17,342.41. In percentage terms, the index had its worst day since Oct. 7, 2022.
This is how the biggest sale in the US market in more than a decade was configuredaccording to Goldman Sachs research. And technology companies lost around $759.9 billion in market capitalization during Wednesday’s session, as investors dumped G7 tech companies due to concerns about the profitability of AI investments.
Hedge funds continue to bet on AI
In a note, Goldman Sachs analysts led by Vincent Limexplained that this sale was mostly driven by funds that only invest in long positions that reduced their positionssuggesting that long/short hedge funds remained relatively unphased by the decline.
“The collapse of the US market appears to be driven by a significant reduction in positions by the community [de fondos solo largos] and less so due to further risk reduction by hedge funds (following the large divestments seen last week),” the Goldman analysis said.
Hedge funds had previously made efforts to reduce their exposure to the technology sector, which led to the selling of more technology, media and telecom stocks in June than in any other month since 2016.
Looking at trades through Goldman Sachs’ brokerage division, analysts said the recent U.S. market decline was driven by a broad sell-off in macro products – including index funds and exchange-traded funds – fueled almost entirely by short selling.
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In contrast, individual stocks were net-bought during Wednesday’s market plunge, driven by investors who bought shares in energy, finance and consumer discretionary, movements that offset sales in the industrial, basic and public services sectors.
The information technology sector was only marginally net-sold, despite being by far the worst-performing sector during Wednesday’s drop, according to data from Goldman Sachs’ brokerage division.
“While the IT sector was by far the worst performer on Wednesday, it was only marginally net-sold, suggesting hedge funds remained relatively calm and stable at the individual stock level,” Goldman analysts said.
Source: Ambito
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