Hedge funds’ confidence in global consumer spending has sharply deteriorated, with exposure to consumer discretionary stocks — including hotels, restaurants, and leisure firms — plunging to the lowest levels since the 2020 pandemic, according to Goldman Sachs’ latest hedge flow data.
The shift marks a decisive rotation away from sectors tied to household spending power and discretionary demand — a signal that macro caution is rising across institutional portfolios.
🔹 Key Highlights
- Consumer discretionary stocks were the most net-sold sector globally and in the U.S. last week.
- Hedge funds unwound long positions (bets on price increases) and added shorts, signaling a defensive stance.
- Exposure to the sector is now at a five-year low, matching levels last seen during the COVID-19 shock.
- In contrast, U.S. healthcare equities saw eight consecutive weeks of net buying, the fastest accumulation pace in nine months.
🔹 Investor Sentiment Shift
The move coincides with:
- Weaker U.S. economic data and slowing consumer sentiment (at a 3.5-year low).
- Gold prices rising as investors hedge against macro risk.
- Optimism fading around the U.S. government shutdown resolution and policy uncertainty.
“Hedge funds are quietly rotating from consumer cyclical exposure to defensive healthcare and hard assets — a classic risk-off signal,” a senior Goldman strategist noted.
🔹 The Bigger Picture
While global equities remain supported by easing financial conditions and AI-driven optimism, institutional flows suggest:
- ⚠️ Growing recession hedging behavior
- 🏥 Preference for non-cyclical, earnings-resilient sectors
- 💰 Renewed interest in gold and defensive assets amid fiscal concerns