The Federal Reserve of the United States decided to keep interest rates at their highest level in nearly 20 years in early May due to high inflation and a strong economy. Despite this, the US stock market experienced a wave of selling last week.
In the background of high inflation and a booming economy, the Federal Reserve announced during its interest rate decision meeting in early May that it would maintain the federal benchmark interest rate at 5.25-5.5%, achieving six consecutive freezes.
Nick Timiraos, a journalist for The Wall Street Journal known as the “Fed Whisperer,” pointed out in his latest article on the 23rd that the Federal Reserve concluded during the meeting that the time it needs to keep interest rates at the current level will be longer than expected due to last month’s disappointing inflation data for the third consecutive time.
Against this backdrop, David Solomon, CEO of Goldman Sachs, also stated at an event at Boston College on the 22nd that due to government payments and investments in artificial intelligence infrastructure, the US economy has shown resilience, and he expects the Federal Reserve will not cut interest rates this year.
Goldman Sachs report: Hedge funds are reducing their holdings of US stocks with unusual intensity.
At the same time, Goldman Sachs’ commodities division released a report stating that hedge funds reduced their holdings of US stocks with unusual intensity last week (5/20-5/24), reversing the trend of net buying for five consecutive weeks, which is the first time since early January this year. In addition, the selling situation includes the following:
Index funds, ETFs, and individual stocks all experienced net outflows of funds. Index funds and ETFs, as macro investment products, experienced net sales for the first time in six weeks, while individual stocks experienced net sales for three consecutive weeks, marking the largest nominal net outflow scale so far this year.
The selling action spread across 11 industries in the United States, with the industrial, information technology, and real estate industries experiencing the most significant declines. It is worth mentioning that cyclical industries saw the largest nominal net selling scale since December last year.
The industrial sector was the hardest hit, with net outflows of funds recorded for 11 consecutive trading days. Sub-industries such as machinery, ground transportation, professional services, and airlines saw the highest net selling in over a decade in the past two weeks.
The report also pointed out that recent signs of economic recovery and the Federal Reserve’s hawkish policy stance indicate that the environment may maintain high interest rates for a long time, and the selling behavior is investors’ response.