Goldman Says Hedge Funds Use Rally in US Stocks to Offload Risk

Goldman Sachs’ prime brokerage team says hedge funds used the rapid S&P 500 rally to pare risk, cutting overall long and short exposures sharply even as the index hit record highs. Analysis shows US long-short gross leverage fell 4.6 percentage points last week — the biggest notional de‑grossing in seven months — with nine of 11 sectors net sold. Consumer discretionary saw seven straight weeks of net selling and information technology experienced its largest weekly de‑grossing since July 2024, though tech still represents a historically large share of gross allocation. Systematic strategies (CTAs) have been buying into the bounce while fundamentally oriented investors show less conviction. The positioning shift suggests hedges are trimming exposure into strength, which could limit further upside and leave markets sensitive to shifts in flows and earnings news.