By Nell Mackenzie
LONDON (Reuters) -Hedge funds bought U.S. stocks at the fastest pace in seven weeks during the week to August 15, in anticipation of a long awaited interest rate cut expected from the Federal Reserve in September, according to a Goldman Sachs client note.
Hedge funds bought indices and financial products that rise and fall on economic health, said the Goldman note seen by Reuters on Monday.
That move into U.S. shares comes ahead of the Federal Reserve’s annual central bank gathering in Jackson Hole later this week at which Fed chief Jerome Powell could shed more light on the rate outlook.
Investors price in a roughly 85% chance of a 25-basis-point Fed cut next month, money market pricing suggests.
Recent data has suggested that while U.S. tariffs have not filtered into headline consumer prices yet, jobs market weakness could nudge the central bank to take a more dovish stance.
According to the Goldman note, speculators dumped defensive stocks meant to do well in harsher economic circumstances, such as health care and consumer staples.
They also exited trades on utilities stocks which are often used as a proxy for interest rate trading.
Utilities, staples and health care stocks were sold in the largest amounts in four months, said Goldman.
Financials stocks were also modestly net sold yet saw the largest increase in gross trading activity since November 2024 and the second largest in five years.
All geographic regions benefited from hedge fund stock buying except for Europe.
(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and Susan Fenton)
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