Hedge funds are betting against the US and Asia, Goldman has learned. Why are they waiting for growth in Europe?

Last week, hedge funds actively increased their bets against U.S. stocks and emerging market securities in Asia, Goldman Sachs found out. At the same time, hedge funds were simultaneously betting on the growth of European quotations. World stocks fell for the third week in a row, while bond yields rose due to fears that the war in Iran will maintain pressure on oil prices and trigger inflation, Reuters writes.

Net selling of equities in global markets last week hit the highest since April 2025, with speculators building up short positions for the fifth straight week, Reuters wrote, citing a Goldman Sachs note.

Investors actively exited U.S. and Asian stocks, believing in the strengthening of the European market. The selloffs affected both index products (e.g. ETFs) and individual stocks, the investment bank said in a note. The main blow came to the sectors of cyclical consumer goods, technology and financials.

The only areas where hedge funds held long positions (betting on growth) were consumer staples and energy.

"Europe remains attractively valued relative to the U.S., but it is no longer cheap, offering a smaller buffer in valuation in case geopolitical risks persist or intensify," Goldman Sachs strategists wrote(quoted by Bloomberg).

Strategists remain calm on rising inflation concerns and expect European stocks to return to record highs, a new Bloomberg survey showed. According to the median forecast of 16 experts, the pan-European Stoxx Europe 600 index will end the year at 635 points, up about 11% from its March 20 close.

None of the respondents lowered their targets for the European benchmark index this month, with Unicredit and Deka Bank even raising their forecasts slightly. The latter joined HSBC as the main bulls with a target of 670 points, implying a 17% rise. The two most pessimistic strategists - from TFS Derivatives and Bank of America - allow for a fall of around 2%.

"The conflict in Iran opens a key threshold for European equities: during past oil price spikes, most sectors have posted positive median returns as long as the Brent price does not exceed $100. But above that level, leadership is narrowing and economic risks are rising. The DAX (Germany's stock index) is most vulnerable because of its negative oil sensitivity factor and bias toward energy-intensive sectors, while the FTSE 100 (UK index) and CAC 40 (French index) benefit from a greater weighting to the energy sector," says Laurent Douillet, senior equity strategist at Bloomberg Intelligence.

During trading on Monday, March 23, the Stoxx Europe 600 was down 2.5% at one point and was in the correction zone (lost more than 10% from its last peak). However, investor sentiment changed sharply after US President Donald Trump's statement on talks with Iran and a pause in attacks on Iran's energy infrastructure. The Stoxx 600 was up 1.9% after that, but then partially lost momentum.

The DAX and CAC 40 showed similar dynamics. The British FTSE 100 remained in negative territory even after Trump's announcement.

This article was AI-translated and verified by a human editor