scorecardHedge funds ramp up bets against US stocks as key leverage gauge falls at fastest rate since 2020 crash, says report
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Hedge funds ramp up bets against US stocks as key leverage gauge falls at fastest rate since 2020 crash, says report

Joseph Wilkins   

Hedge funds ramp up bets against US stocks as key leverage gauge falls at fastest rate since 2020 crash, says report
Stock Market1 min read
  • Hedge funds are increasingly betting against stocks and shedding leverage, Bloomberg reported.
  • Their net leverage saw the biggest weekly decline since pandemic-era lows in 2020.

Hedge funds are taking a rapidly bearish stance on US stocks after the Federal Reserve signaled last week it would be keeping interest rates higher for longer.

Managers slashed their net leverage by 4.2 percentage points to 50.1%, according to data from Goldman Sachs' prime brokerage unit seen by Bloomberg – marking its biggest weekly decline since the market's downturn at the start of the coronavirus pandemic.

Net leverage tracks the difference between a hedge fund's long positions and short positions.

Last Wednesday, the Fed kept rates steady, and officials indicated they would remain higher for longer, with one more hike still be on the table before the end of the year, fueling an equity selloff to add to September's month of woe.

The S&P 500 is down around 4% this month. That puts the index on track for its worst monthly performance this year and its second consecutive month of losses.

The Fed's news also caused bond yields to spike. The 10-year Treasury rate has surged 50 basis points in September alone to climb above 4.50% and hit the highest level since 2007.

The recent S&P 500 slowdown, among a slew of other headwinds, has prompted some experts to fear the worst for the US economy.

"Everything that I'm looking at makes me think that there is trouble ahead," said Byron Wien, the vice chairman of Blackstone's private wealth solutions arm. "And if I'm right about that, then the market is dangerous."




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