News Digest: Hedge funds rush to unwind short positions on US stock
July 17, 2023
Global hedge funds are rushing to unwind the bets that they placed on US listed stocks falling lower over fears of an economic downturn caused by rising interest rates and slowing demand. However, the recent persistent rallies are threatening this position now, says a news report.
The report quoted data from JPMorgan Chase and Goldman Sachs to suggest that shorts were a challenge for hedge funds since early June. Short-covering reached a fever pitch, reaching their highest since November 2020, especially on the equity index and exchange-traded funds.
The recent bull run caught portfolio managers off guard and the growing short-covering could further fuel an equity rally, the analysts said while noting that the Nasdaq rose over 42% this year and the S&P 500 went by 17%. However, hedge funds continued to short on single stocks across sectors like staples, communication and info tech.