In a notable turnaround, hedge funds poured into U.S. stocks last week at a pace not seen in nearly two months. This resurgence of investor confidence is tied closely to rising expectations that the Federal Reserve may finally cut interest rates in September, according to data shared by Goldman Sachs.
The inflows weren’t random—they gravitated toward sectors most sensitive to economic conditions. Broad market indices and financial stocks, in particular, attracted significant capital, reflecting a subtle shift from precaution to opportunity. In contrast, defensive sectors—typically considered safe havens—took a beating: healthcare, staples, and utilities experienced their sharpest declines in fund flows over four months.
Interestingly, while financials were largely net sold, trading volumes in the sector surged, hitting levels last seen in late 2024 and only second to peaks in the past five years. And this move wasn’t restricted to U.S. investors—hedge funds from across the globe jumped into U.S. equities, with the exception of Europe.
All signs point to a calculated repositioning—hedge funds are bracing for a potential pivot in Fed policy at the upcoming Jackson Hole symposium. With rate-cut hopes waxing, strategic rotation is gaining steam, and markets are taking note.
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