Hedge funds have placed a record number of short bets against stocks since U.S. President Donald Trump announced his reciprocal trade tariffs on April 2.
According to U.S. investment bank Goldman Sachs (GS), which tracks the moves of major hedge funds around the world, the so called “smart money” remains extremely bearish on stocks despite signs of a recovery in equity markets.
Hedge fund managers and professional traders made their biggest ever one-day sale of stocks on April 3 immediately after Trump announced baseline tariffs of 10% on nearly all U.S. imports. At the same time, hedge funds added protection as fears grow that Trump has set off a global trade war that will lead to an economic recession, said Goldman Sachs.
Self-Protection
Hedge funds scrambled to adjust their positioning and equity exposure as the Dow Jones Industrial Average posted back-to-back losses of more than 1,500 points, a record two-day decline. The benchmark S&P 500 index fell 10% in only two trading sessions – April 3 and 4.
Trump’s policies could raise the average U.S. tariff rate from 2.5% to above 20%, the highest level since 1910. Hedge fund managers wasted little time selling stocks and going into what Goldman Sachs called “self-protection mode.” Nine of 11 investment sectors in the S&P 500 index were net sold over the past week, led by financials, technology, and consumer discretionary stocks.
Heavily Sold Stocks
Among the stocks hedge funds sold hand over fist were consumer electronics giant Apple (AAPL), Bank of America (BAC), and automaker Ford Motor Co. (F). The selling of financial stocks was at the fastest pace since January 2021 and the second fastest pace on record, noted Goldman Sachs.
The investment bank also stressed that there is likely to be increased volatility in the market due to the massive number of short positions, which are bets that stocks will continue to fall. GS stock has declined nearly 20% this year amid the market turmoil.
Is GS Stock a Buy?
Goldman Sachs stock has a consensus Moderate Buy rating among 16 Wall Street analysts. That rating is based on nine Buy and seven Hold recommendations assigned in the last three months. The average GS price target of $638.33 implies 31.01% upside from current levels.
