Goldman Sachs revealed that global hedge funds continued to add bearish bets on stocks to their portfolios in the week to August 1, when new data raised concerns that the US economy was slowing faster than expected.
This marks the third straight week that hedge funds' bearish bets on stocks have outpaced the addition of long positions, the bank said in a note to clients.
He explained that one long position was added for every 3.3 short bets.
The Nasdaq Composite Index fell into correction territory on Friday after economic data for two straight days pointed to a faster-than-expected slowdown, fewer jobs were added than expected and manufacturing activity declined, and the index closed down 2.43 percent.
Hedge funds cut exposure to seven of 11 global sectors, including financials, industrials, real estate and energy, while health care stocks sold at the fastest pace in nearly a year.
Goldman Sachs revealed in a separate note that hedge funds have been unwinding their bets on risk for two weeks, and on Friday core hedge funds had their worst day since June 2022, falling 1.8 percent on average.
