Global Hedge Funds Increase Short Positions Against U.S. Stocks

By Carolina Mandl
NEW YORK (Reuters) – Global hedge funds increased their bets against U.S. stocks last week through January 9, prior to a strong U.S. jobs report that triggered a sell-off on Wall Street, according to notes from Morgan Stanley and Goldman Sachs published on Friday.

The U.S. Labor Department released an employment report showing job growth surged to 256,000 jobs in December, the highest since March, while unemployment dropped to 4.1%.

This unexpected jobs data caused a decline in stock prices, with the S&P 500 falling 1.54% on Friday, erasing all its gains for 2025.

Morgan Stanley noted that portfolio managers heightened their short positions—bets on a decrease in stock prices—across sectors such as staples, software, financials, and healthcare in anticipation of the jobs report. Simultaneously, they diminished long positions in communication services.

Despite this, hedge funds were observed buying stocks in European and Asian markets during the same timeframe.

Goldman Sachs reported that short positions in portfolios were more prevalent than long additions across all regions, particularly North America and Europe.

Jon Caplis, CEO of hedge fund research firm PivotalPath, stated, “We’ve seen a rotation where managers have been taking profits, selling their longs, and then adding to shorts.” He linked this behavior to the Federal Reserve’s more aggressive stance on interest rate cuts and significant upcoming data releases, such as the consumer price index on Wednesday.

An exception noted by Goldman Sachs was in the technology, media, and telecommunications (TMT) sector, where hedge funds added to their positions at the quickest pace in three months.

Stocks in the technology sector experienced considerable losses, down 2.23%, ranking among the sectors hardest hit alongside financials and real estate. Major tech firms are set to begin reporting earnings after Martin Luther King Jr. Day on January 20.

As leading global prime brokers, Goldman Sachs and Morgan Stanley monitor the portfolios of their hedge fund clients to identify positioning and flow trends.