Hedge funds have heightened their short positions in U.S. stocks for five out of the past six weeks, marking the highest level of notional short selling since September 22nd, as per information from Goldman Sachs (NYSE:GS)' prime brokerage team on Monday. This trend has been primarily concentrated on macro products, including equity index and exchange-traded funds.
The pattern of growing short flows in U.S. stocks has been noticeable since the beginning of this year, with a total increase surpassing 20%, according to a separate report from Goldman Sachs. The financial institution closely monitors these data through its prime brokerage unit, which provides lending and trading services and tracks hedge fund investment behaviors.
This recent spike in short positions comes after a turbulent week for stocks when Treasury yields hit a 16-year high. The instability led to weekly losses for all three major U.S. stock indexes. Both the S&P 500 and the Nasdaq underwent their most significant weekly percentage drops since March, from Friday to Friday.
In addition to increasing short positions, hedge fund managers also opted to lower risk last week mainly by offloading long equity positions. The combined long and short de-grossing activity in Japan last week was noted as the most substantial since December 21st.
Meanwhile, on Friday, the Bank of Japan reaffirmed its commitment to sustaining ultra-low interest rates. It also restated its pledge to continue backing the economy until inflation reliably hits its target of 2%.
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