Hedge Funds Rotate Out Of US Stocks And Into Global Industrials

What’s going on here?

Hedge funds are dialing back investments in US stocks and ramping up bets on global industrials. According to Goldman Sachs, funds are shifting into European and Asian industrial shares, while unusually building up bets against the US market.

What does this mean?

Last week, hedge funds flipped to a net short position on US equities for the first time in nearly two months, signaling they expect more downturns after the S&P 500 slid 2.8% in just five days. Renewed US–China trade spats and a lengthy government shutdown have sapped investor confidence, prompting funds to hedge by shorting US stock indices but holding onto select US names they still favor. Meanwhile, hedge fund activity in global industrials reached five-year highs – with Europe and developed Asia seeing the biggest inflows, while US industrial stocks lagged. Subsections like electrical equipment, machinery, aerospace, and airlines are popular, showing most of these new positions are betting on gains. Even with this rotation, tech stocks remain the biggest net buy globally, maintaining their top spot in hedge fund portfolios.

Why should I care?

For markets: Global industrials take center stage.

Choppy markets are sending hedge funds on the hunt for opportunities outside the US, fueling renewed interest in Europe and Asia’s industrial sectors. More shorts on US shares highlight both nerves about further declines and confidence in global areas that seem better insulated from political squabbles and trade headwinds.

The bigger picture: Capital finds new global homes.

This latest hedge fund rotation fits with a bigger move in global finance: trade tensions and political uncertainty are nudging investors to rebalance away from US exposure. It’s a reminder that while tech remains the darling, interest in industries tied to manufacturing and supply chains is rising as Europe and Asia see more investment flow their way.