Hedge funds considered “smart money” are selling global stocks at the fastest rate in three months, increasing their bearish bets on the stock market.

According to Goldman Sachs data, professionals sold global stocks for the second straight week last week, which was almost entirely driven by short selling. This is also the biggest sell-off for hedge funds since mid-January.

Goldman Sachs pointed out that non-essential consumer goods stocks were among the worst performing and most sell-off sectors last week. Every day, hedge fund managers are reducing their long positions in the industry and shorting retail-focused ETFs.

Bank of America's customer data also showed a similar trend, with hedge fund clients selling stocks for the fifth consecutive week last week and exiting the shares of small, medium, and large companies.

Currently, investors are re-evaluating the Federal Reserve's path to cutting interest rates. The market expects to cut interest rates 2-3 times during the year, and even thinks that the first rate cut in the year will only occur in September. In stark contrast to this, at the beginning of this year, traders once expected as many as seven interest rate cuts in 2024.

Along with the collapse of expectations of interest rate cuts, the US stock market showed a clear “no increase” trend. For example, the Dow Jones Industrial Average fell 2.3% last week, the worst weekly performance since March 2023. The S&P 500 index fell nearly 1% last week, the biggest weekly decline since early January.

The rise in US stocks this week will face a key test: first, whether overheated inflation data will once again stifle hopes for interest rate cuts; second, the first quarter earnings season for US stocks begins, and whether the profitability and prospects of companies can support the current high valuations.

Editor/Jeffrey