A new report from Goldman Sachs’ prime brokerage division shows that hedge funds bought commodity-sensitive stocks at the fastest rate in five months in the week ending July 4. They also put a lot of money into U.S. energy and materials companies for the third week in a row.
Goldman Sachs’ research shows that hedge funds have been net sellers of commodity-sensitive stocks for six weeks in a row, up until three weeks ago.
The report said that hedge funds have changed their minds about their buying spree and are now putting all of their money into the materials and energy sectors. They have done this by placing a lot of long bets on companies in a wide range of sub-sectors, such as oil, gas and consumable fuels, energy equipment and services, containers and packaging, and mining and metals.
This year, energy stocks have gone up because of higher oil and gas prices. This is because the global economy has grown faster than expected and there are more problems in the Middle East. The S&P 500 Energy Sector Index XX:SP500.10 has gone up by 8% so far this year.
Bloomberg reported in April that hedge funds had begun selling their shares in energy companies in order to cash out at the peak of the rally in case there was a short-term drop in the value of energy sector stocks.
Bloomberg reported that hedge funds instead put their money into crude oil call options. This way, they could make money if energy prices went up because of the worsening fighting between Israel and the Shia militia Hezbollah in Lebanon, but there was less risk.
As 2024 has gone on, metal prices have also gone up sharply. This is because investors are expecting a sharp rise in demand due to the global energy transition and the rise of more advanced AI technologies.
So far this year, the S&P 500 Metals & Mining Industry Index XX:SP500.151040 has gone up 7%. During that time, copper prices HG00, -0.21% have gone up 19% and gold prices GC00, -0.74% have gone up 15%.
Hedge funds also changed their minds and bought more stocks from outside the U.S. than they sold. This was the first time in three weeks that they were net buyers of stocks from outside the U.S. They put their money into shares in European and Asian companies while selling shares in Chinese companies.
Goldman Sachs’ research shows that the most popular stocks around the world were those of energy, financial, and industrial companies. On the other hand, the most popular stocks were those of communication services, IT, and utilities companies.
