Goldman Sachs' latest data shows that "smart money" on Wall Street is accelerating the sale of technology stocks and adjusting direction. Last week, hedge funds poured into energy and materials stocks at the fastest pace in five months.

Goldman Sachs' primary brokerage business record shows that global stock markets saw a small net buying for the first time in three weeks during the first week of July, that is, last week. Macro products (i.e. ETFs) and individual stocks are both in net buying, dominated by short covering and long buying. Looking at different regions, most major markets are net buying, with Europe and Asia in the lead. In terms of sectors, industrial, financial, and energy sectors are the most net bought sectors globally, while communications services, information technology (IT), and utilities are net sold the most.

Goldman Sachs' primary brokerage business Prime Report points out that after the general lack of funds flow and mostly bearish sentiment, hedge funds net bought commodity-sensitive stocks at a record pace last week. Specifically, energy and materials stocks were the most net bought sectors in last week's Goldman Sachs US Prime record. These commodity-sensitive sectors achieved net buying for the third consecutive week and the largest net buying volume in five months, driven almost entirely by long buying.

After six consecutive weeks of net selling, the materials sector achieved net buying for the third consecutive week. Among the sub-industries, containers and packaging and metals and mining were both net bought, overwhelming the moderate net selling impact of paper and forest products and chemicals.

Meanwhile, the energy sector saw three weeks of net buying in the past four weeks. Among the sub-industries, oil, natural gas and consumable fuels as well as energy equipment and services all achieved net buying last week.

Nevertheless, materials and energy are still the industries that hedge funds are least willing to buy, and their long/short ratios are at or near the lowest level in five years.

The long/short ratio of the materials industry is currently 1.98, still far below the historical average level, lower than last year's level of 77% and the past five years' level of 94%. At the same time, the long/short ratio of the energy industry is currently 1.34, lower than last year's level of 47% and the past five years' level of 89%.

In other words, if hedge funds are indeed tired of buying technology stocks before the AI bubble bursts and buying stocks in the energy and materials industries that have been stagnant for many years, there is still a long way to go to catch up with the historical average buying level for the latter two.

Last month, actively selling short and short selling TMT stocks (technology, media and telecoms), mainly semiconductor stocks, including Nvidia, hedge funds' net selling of TMT stocks in the US will set a record for Goldman Sachs' primary brokerage business. Among the 11 major sectors of the US stock market, eight sectors showed net selling in the week before last, with the consumer goods sector heavily shorted, showing net selling for the third consecutive week and setting the largest net selling since November 2023. The industrial, materials, and energy sectors showed net buying.

Editor/Somer