Hedge funds sell planes, trains, automobiles; buy energy stocks, Goldman says

Hedge funds sold industrial stocks at their fastest pace since December while buying energy stocks for a fourth straight week last week, a Goldman Sachs ( GS ) note seen by Reuters showed on Monday.

Hedge funds sold off industrial stocks last week at some of their highest levels in five years, according to a note published on Friday.

Bets were directed against companies that provide professional services, ground transportation, cars and passenger airlines, despite a “modest” amount of buying in aviation and defense stocks.

A short position, or a bet against a company’s stock, expects the value of an asset to decline.

The shift from industrial stocks to energies reveals early hedge fund points on which economic sectors could thrive following an expected US rate cut.

“Global growth will be better than expected if the Fed can pull off a soft landing and that’s probably why these traders are making the switch,” said Paul O’Neill, chief investment officer at the wealth management firm. Bentley Reid.

Fed Chairman Jerome Powell speaks in Jackson Hole on Friday, and his comments will likely be scrutinized for clues about the extent of rate cuts in the coming months.

Meanwhile, hedge funds continued to gain shares of oil and gas companies.

Energy drew bids from hedge funds, being the net sector of stocks bought in Goldman’s U.S. prime brokerage portfolio, which also lends trading money and tracks hedge fund trading, the note said.

Hedge funds bought oil, gas and consumables and energy equipment and supplies companies last week for the fourth week in a row, the note added.

These speculators now own the largest proportion of energy stocks they have had all year, the bank note said.

Those bets also reflect what analysts have called the “Trump trade.”

Investors told Reuters in late July that hedge funds betting that former President Donald Trump would win back the White House in the November election had increased exposure to energy companies, which they believe could benefit from a looser regulatory environment.

But some stocks suffered, including shares of European carmakers, which could be hit hard by potential tariffs on foreign imports.

(Reporting by Nell Mackenzie; Editing by Dhara Ranasinghe and David Evans)