By Nell Mackenzie
LONDON (Multibagger) - Hedge funds continued to take bets against bank and financial stocks in the week to Friday, Goldman Sachs wrote in a note seen by Multibagger on Monday, amid reported job cuts and reduced dealmaking.
Financial stocks ended the week as the most net sold sector at Goldman Sachs' prime brokerage trading desk, which serves global hedge funds, the note said.
Banks, insurance companies, publicly traded property trusts and capital markets firms which allow people to buy and sell bonds and stocks were all sold on a net basis for the fourth straight week.
A short position bets that an asset price will decline in value, whereas a long position expects it to rise.
Europe's banking index has risen 1.7% since August 26, whereas the Dow Jones banking index closed Friday up over 2% for the week ahead of Monday's U.S. holiday.
Financials as a stock sector were sold in six out of the last seven weeks, said the Goldman Sachs note.
The selling was global, led in notional terms by North America, developing markets in Asia and Europe, the note said.
While total deal values globally have risen by about a fifth, the number of mergers and acquisitions deals has fallen by 25% for the year to June 25, LSEG data shows.
Hedge funds carried out modest net buying in consumer finance, said the Goldman Sachs note.
Hedge funds are actively betting against bank and financial stocks, according to a recent note from Goldman Sachs. This trend comes amidst reported job cuts and reduced dealmaking in the financial sector.
Financial stocks were the most net sold sector at Goldman Sachs' prime brokerage trading desk, serving global hedge funds. Banks, insurance companies, publicly traded property trusts, and capital markets firms were all sold on a net basis for the fourth consecutive week.
Short positions, which bet on an asset price declining, outnumbered long positions, which expect prices to rise. Despite this, Europe's banking index has seen a 1.7% increase since August 26, while the Dow Jones banking index closed the week up over 2% ahead of the U.S. holiday.
Financials as a stock sector have been sold in six out of the last seven weeks, with the selling being global and led by North America, developing markets in Asia, and Europe. While total deal values globally have increased, the number of mergers and acquisitions deals has fallen by 25% for the year to June 25, according to LSEG data.
Hedge funds did engage in modest net buying in consumer finance, as noted by Goldman Sachs. This shift in investment strategies could have implications for the overall market sentiment and future financial trends.
Analysis:
The continued bets against bank and financial stocks by hedge funds indicate a lack of confidence in the sector's performance. This could be influenced by job cuts and reduced dealmaking activity, suggesting potential challenges ahead for these industries. Investors should monitor these trends closely and consider diversifying their portfolios to mitigate risks associated with these sectors.