Tech stocks saw the largest net buying by hedge funds since December 2022, driven by an increase in long positions and short-covering. Hedge funds have been net buyers of the sector for 4 straight weeks, which has been in decline for most of April.
According to Goldman, hedge fund allocation to semiconductors in particular jumped to 4.4% of overall US stock allocation, the highest level in more than 5 years.
Macro Chart In Focus
Analyst Team Note:
Markets have shifted expectations for Fed cuts this year from 160 basis points in forecasts at the end of 2023 to 35 basis points in late April.
According to Bloomberg’s Fed sentiment index, the Fed is expected to continue leaning hawkish in upcoming FOMC meetings.
“That raises the question, will the Fed have to deliver more hawkish surprises in order to tighten financial market conditions, and bring disinflation back on track? In our view, the answer is yes. And that process could start as soon as this Wednesday’s press conference.” - Bloomberg
“With initial jobless claims low and moving sideways, we don't expect the recent momentum in the labor market to slow. Moreover, catch-up effects in certain industries continue to buoy job growth.” - BofA
Chart That Caught Our Eye
Analyst Team Note:
According to BestEx Research, an trading algo developer, about a third of all S&P 500 stock trades are now executed in the final 10 minutes of the session, up from 27% in 2021.
Some academics hypothesize that passive funds may be buying at the close because the cost of making such large transactions would be less than what liquidity providers charge earlier in the day.
Assets in passive equity funds have surged over the past decade to more than $11.5 trillion in the US alone.
