Heavy short sales by hedge funds and disposals by systematic investors have increased the potential for a sharp swing higher for stocks in the event of a de-escalation in the Iran war, according to traders at Goldman Sachs Group Inc.
Hedge funds have just cut global equity holdings for a sixth straight week, driven by short sales, Goldman’s prime trading desk said. The latest selling was wide spread, with net disposals across all major regions. In Europe, short exposure in macro products that trade on broader economic themes has reached 11%, a 10-year high, the team led by Vincent Lin wrote in a weekly recap of market data through March 26.
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