Global hedge funds raise bearish bets amid fears of slowdown in US economy


(MENAFN) Goldman Sachs reported that global hedge funds have been increasing their bearish bets on stocks for the third consecutive week, up to August 1. This trend emerged as new economic data heightened concerns about a faster-than-anticipated slowdown in the U.S. economy. The bank's note to clients highlighted that hedge funds added one long position for every 3.3 short bets, indicating a significant tilt towards pessimism. This cautious stance comes in response to data showing fewer job additions than expected and a decline in manufacturing activity.

The impact of these economic indicators was evident in the Nasdaq Composite Index, which fell into correction territory on Friday, closing down 2.43 percent. The downturn followed two consecutive days of troubling economic data that intensified fears of a sharp economic slowdown. In response, hedge funds reduced their exposure across seven of 11 global sectors, including financials, industrials, real estate, and energy. Notably, healthcare stocks saw the fastest pace of selling in nearly a year.

In a separate note, Goldman Sachs revealed that hedge funds have been scaling back their risk bets for two weeks. This cautious behavior culminated on Friday when core hedge funds experienced their worst day since June 2022, with an average decline of 1.8 percent. This retreat from risk highlights the growing apprehension among hedge fund managers about the trajectory of the U.S. economy and its potential impact on global markets. 

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