Hedge funds accelerated their purchases of US technology and media stocks at the fastest pace in four months last week, according to a key note from Goldman Sachs, Reuters reported on Monday.
This increase is largely due to expectations of a 50 basis point rate cut by the US Federal Reserve.
The rate cut is expected to boost industrial investment by making it cheaper for companies to borrow and boosting consumer spending on technology, potentially boosting the sector’s share prices.
The Fed’s recent rate cut, its first in four years, helped lift U.S. stocks, with the S&P 500 closing Friday up 1.15 percent as recession worries eased and investors weighed benefits of a looser monetary policy.
Hedge funds tripled their long positions in IT stocks compared to their short positions, reflecting optimism that these stocks will rise in value, the report added.
Buying activity was particularly strong in semiconductor and related equipment companies, which outpaced sales in hardware companies such as those that make computers and storage devices.
Hedge funds exited short positions and increased long bets on interactive media and entertainment companies, signaling positive expectations for the sector.
Overall, technology and media now account for nearly a third of US hedge funds’ net portfolio exposure, while consumer staples were the biggest sellers, the report added.
Selling in consumer staples stocks, including hotels and restaurants, beat markets for the first time in four weeks, marking the biggest net selloff in that sector in a year.
Gross leverage, which includes total borrowing and hedge fund investments, reached about 278%, one of the highest levels seen this year.
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Reference;
Acharya, N. (2024) Hedge funds are using Fed’s big rate move to buy US tech stocks says Goldman Sachs By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/stock-market-news/hedge-funds-are-using-feds-big-rate-move-to-buy-us-tech-stocks-says-goldman-3627628 (Accessed: 23 September 2024).
