While many are still celebrating the stock market’s stellar 2024, the smart money on Wall Street has already shifted to a defensive mode at the turn of the calendar. Hedge funds were net sellers of U.S. stocks in each of the five sessions from Dec. 27 to Friday Jan. 3, dumping shares at their fastest pace in more than seven months, according to Goldman Sachs prime brokerage data. Health care, financial and industrial stocks, which initially rallied on the back of Donald Trump’s re-election, saw the most selling from hedge funds during the period, Goldman’s data showed. The action is mostly driven by short selling, or wagers that bet against the market and individual stocks, the data said. “Hedge funds typically re-lever gross exposure: this starts now. We are starting the year with a large local short base,” Scott Rubner, Goldman’s managing director for global markets and tactical specialist, wrote in a note to clients on Tuesday. .SPX 1Y mountain S & P 500 over the past year. Fast money investors that use short-term trading strategies and leverage are bailing on stocks after the S & P 500 wrapped up 2024 by scoring a second consecutive annual gain above 20%, spurred by confidence over lower interest rates, economic strength and profits from artificial intelligence. The S & P 500 is expected to gain another 12% in 2025, ending the year around 6,630, according to the average strategist forecast from the CNBC Market Strategist Surve y. But some investors have grown cautious, citing high valuations and the chance that inflation might reignite, brought on by President-elect Donald Trump’s plans to impose tariffs on imports of overseas goods. Dan Niles, a widely followed hedge fund manager, r ecently named cash as one of his top picks for the first time since 2022. The founder of Niles Investment Management said with inflation running at 2.5% to 3%, he expects cash could be a good place to hide out. “The last time I picked cash was in 2022 and the market ended up going down 19%,” Niles told CNBC earlier this week. “We’ll see how this year turns out. But I think especially, to start the year, you’re going to get a 4% yield in money market funds if you have cash. I don’t think that’s a bad place to be.”
