Hedge Fund Short Selling Was The Largest Since Sept 2023

Even though it was a solid week for stocks, with US equities gaining solidly for the week (RTY +4.5%, NDX +1.9%, SPX +1.7%) amid solid earnings, signs of a resilient US consumer, and potential rotations out of mega cap tech and into the broader market (Bitcoin Sensitive Equities, Non-Profitable Tech, and Nuclear were among the themes that recorded the largest gains on the week, while Megacap Tech and China ADRs underperformed), hedge funds sold equities for the 2nd consecutive week (see "Hedge Funds Are Again Aggressively Shorting Stocks: Goldman Prime") and saw the largest net selling in 3 months, driven by risk-on flows with short sales outpacing long buys 2.9 to 1 – last week’s notional short selling was the largest since Sep ’23.

Some more details from the latest Goldman Prime Brokerage report:

• Macro Products (Index and ETF combined) were net sold for the 2nd straight week (-0.7 SDs), driven almost entirely by short sales. US-listed ETF shorts increased by +0.5% (now up +6.5% month/month) led by shorting in Broad-Based Equity and Sector ETFs.