Hedge funds sold off US stocks for the fifth week in a row last week in anticipation of a downturn in the economy due to President Donald Trump’s vow to impose tariffs on key trading partners.
The funds sold their stock holdings in every geographical region apart from developed markets in Asia, a Goldman Sachs note published Friday and seen by Reuters on Monday showed.
The number of short positions on industrial stocks approached almost twice the number of longs that wagered this sector would rise, according to Goldman’s data.
The selling was the largest since August, when a stock market meltdown that started with the unwinding of yen carry trades rippled through to US tech stocks, said the bank.
Real estate stocks were the only sectors where hedge funds bet that values would rise, according to Goldman.
All kinds of listed real estate stock have been popular with hedge funds including residential, retail and health care, it said.
“Real estate often performs well in inflationary environments, as property values and rents tend to rise with inflation,” said Bruno Schneller, managing director at Erlen Capital Management.
“If trade wars lead to higher import costs and broader inflationary pressures (via tariffs), real estate becomes an even more attractive hedge against eroding purchasing power.”
The short bets came as investors braced for potential market turmoil over China’s artificial intelligence advancements through DeepSeek and the economic impact of Trump’s 25% tariffs on Canadian and Mexican goods.
On Monday, the tariff on Mexican goods was delayed for a month after Mexico’s president, Claudia Sheinbaum, announced that she would deploy thousands of additional troops to the border with the US in an effort to crack down on migrants and the smuggling of fentanyl.
Trump, who plans to speak to Canadian Prime Minister Justin Trudeau on Monday, has indicated that tariffs on Canadian and Chinese imports will take effect on Tuesday.
Many large investors increased bets against individual stocks while shifting toward broader financial instruments to hedge risks.
Unlike hedge funds, which anticipated a downturn, everyday investors made a different bet.
Many assumed Trump would hesitate to enforce tariffs that could slow the economy, leading to a surge of retail investments.
Data from JPMorgan Chase & Co. shows that individual investors poured $2.1 billion into U.S. stocks last Friday alone.
Emma Wu, a strategist at JPMorgan, pointed out that such a large one-day investment has only happened nine times in the past three years, with five of those occurring in 2025, according to Bloomberg News.
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