The US stock market experienced two days of intense fluctuations with a "bull-bear double kill," causing hedge funds to go from stop-loss to trampling in a state of embarrassment.
Hedge funds suffered heavy losses in the two-day volatile stock market, on Thursday they rushed to cash out to avoid losses, but after prices rebounded the next day, they had to liquidate their positions again.
Notice that hedge funds were on the wrong side during this intense two-day stock market turmoil: on Thursday, they hastily took protective measures to avoid losses, only to see prices rebound quickly the next day, forcing them to hastily close their positions.
John Flood, a partner at Goldman Sachs, wrote in a client report on Friday: "Our trading desk saw hedge funds aggressively covering macro products (such as indices and ETFs). Considering that hedge funds were purely in profit protection mode yesterday, actively hedging through macro products today is understandable."
Goldman Sachs' main brokerage data shows that net short positions of US exchange-traded funds surged by 4.6% on Thursday, marking the fifth largest single-day increase this year and one of the largest in the past five years.
Three of these five large fluctuations occurred in early April, when former President Trump's tariff threats pushed the S&P 500 index to the brink of a bear market.
In addition to macro hedging tactics (such as establishing short positions in ETFs and indices), hedge funds also reduced their individual stock positions. Goldman Sachs particularly noted signs of surrender in the technology sector, which was hit hard in Thursday's sell-off. Deleveraging spread across the industry, particularly affecting semiconductor, semiconductor equipment, and software companies.
As hedge funds rushed to hedge their stock market losses, the S&P 500 index witnessed its most dramatic intraday reversal since April. The main benchmark index closed at its lowest level in over two months on Thursday.
But establishing short positions seemed ill-timed on Friday, as hedge funds were forced to close their positions as the stock market rebounded. The S&P 500 index recorded its broadest daily gain since May, rising by 1%. Alphabet and Apple led the market higher, indicating that despite ongoing concerns about the valuation of large tech stocks, confidence remains.
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