Hedge funds bought US equities at the fastest pace for two years on bets that the interest rate hiking cycle in the States is almost over.
According to investment bank Goldman Sachs (NYSE:GS), global hedge funds carried out on their largest buying spree since December 2021 in the week up until 3 November.
Those thinking about it got caught in a short squeeze, said the bank’s trading desk, with investors trying to close out shorts adding to the upward surge.
All three major US stock market indexes soared with five consecutive days of rises for the S&P 500 and six for the Nasdaq – both of which saw their biggest one-week percentage gains of 2023.
Long or open buy positions in tech reached the largest in eight months, said Goldman, with software companies the most favoured alongside hospitality and other consumer non-durables.
The buying was focused on the US, said the bank, with Europe and Asia apart from Japan still out of favour though.
UK blue chips also rallied with FTSE 100 up 2.5% on the week.
Morgan Stanley (NYSE:MS), meanwhile, pointed out that some US$3 billion of Chinese equities had been sold in October.