Fast-money investors are rapidly pulling back from global equities as fading hopes for a near-term resolution to the Middle East conflict weigh on sentiment. Data compiled by Goldman Sachs GS indicates hedge funds sold global stocks in March at the fastest pace in 13 years, marking the second-largest wave of selling since the bank began tracking the data in 2011. The shift comes alongside a meaningful market drawdown, with the MSCI All-Country World Index declining 7.4% during the month, its weakest performance since 2022, while the S&P 500 Index SPY fell 5.1%, reflecting growing pressure on risk assets.
The underlying positioning suggests investors are increasingly bracing for further downside. Much of the selling activity was driven by a rise in short positions, particularly through exchange-traded funds, where hedge funds expressed more bearish views on the market’s trajectory. Short interest across US-listed ETFs climbed 17%, led by increased shorting in large-cap equity funds. At the sector level, selling was broad-based, with eight of 11 industries seeing net outflows, and the heaviest pressure appearing in industrials, materials, and financials—areas typically more exposed to economic cycles.
At the same time, there are early signs of rotation rather than a full retreat from equities. Hedge funds increased exposure to consumer staples at the fastest pace since July 2025, suggesting a move toward more defensive positioning. They also turned net buyers of technology, media, and telecom stocks for the first time in four months, though this was primarily driven by short covering rather than the initiation of new long positions. This distinction could imply that while investors are reducing bearish bets in select areas, broader conviction in a sustained market rebound remains limited.