Goldman Sachs found that the net selling scale of US stocks by hedge funds in the past ten trading days was the largest in the past year, exceeding 99% of the level in the past five years. At the same time, the net buying scale of European stocks in the past ten days was the highest, and the over-allocation level of European stocks was the highest on record.
As of Wednesday, the three major US stock indexes have fallen for three consecutive days, with the S&P and NASDAQ Composite Index both experiencing the longest consecutive decline since May 4. Wall Street institutions have found that hedge funds have already "run away" before this adjustment.
Vincent Lin, an analyst in Goldman Sachs' main brokerage business, pointed out in a report released on Wednesday that Goldman Sachs' sentiment indicator, the GS Sentiment Indicator, shows that more and more evidence indicates that hedge fund positions are no longer a positive factor for US stocks. The overall trading flow of Goldman Sachs' main brokerage business (PB) shows that hedge funds are beginning to prepare for the downside risk of US stocks.
Specifically, Lin found that hedge funds have net sold US stocks for nine trading days in the past ten trading days. In terms of cumulative nominal value estimation, the net selling scale of US stocks in the past ten trading days is the largest in the past year, exceeding 99% of the level in the past five years.
Goldman Sachs PB now shows that hedge funds are underweight North American stocks by about 5% compared to the MSCI Global Index ACWI, the lowest underweight level since Goldman Sachs PB has records.
At the same time, in the past ten trading days, hedge funds have net bought all other regional stock markets of Goldman Sachs PB, and the net purchase scale of European stocks is the highest in nominal value calculation, followed by the stock markets of developed Asian markets, mainly due to the continuous net inflow of funds into the Japanese stock market. European stocks are over-allocated by about 3% compared to MSCI ACWI, the highest over-allocated level since records began.
However, the recent stock customer fund flow of Bank of America shows that hedge funds and institutional clients led the buying last week, and the inflow scale of the third largest hedge fund since Bank of America's record in 2008 appeared.
Zerohedge pointed out that the difference between Goldman Sachs and Bank of America data is that Goldman Sachs' data is directly based on daily statistics using real-time PB data, while Bank of America uses comprehensive summaries to provide a summary perspective of cash-executed inflows into US stock trading by Bank of America customers. It believes that Bank of America's data is outdated and unreliable, at best like an Excel chart version that reflects the situation.
In contrast, Bank of America's data on high net worth clients, or so-called retail clients, is much more accurate. Bank of America said that such clients returned to selling after buying US stocks for a week, and the number of sellers in recent weeks has reached a new high since April.
Looking at the breakdown, Bank of America customers bought into seven of the 11 S&P 500 sectors, with the communication services sector leading the way in terms of buying volume. This sector has seen six consecutive weeks of inflows. The buying funds for the non-essential consumer goods sector reached the largest inflow since 2008, with hedge funds and institutional clients leading the way.
Meanwhile, the energy sector saw the largest outflow of funds among all sectors. After continuous inflows since early May, the sector's four-week average has now turned from inflow to outflow. Although there was a small inflow of funds into the technology sector last week, the four-week average has been net outflow for several weeks since July last year.
