Citi Bank: Hedge Fund Selling is Accelerating

In a report released on Tuesday, Citi Bank indicated that long-term portfolio managers increased their market investments last week, with their additions focused on the technology, industrial, and financial sectors. In contrast, they reduced their exposure to the energy, healthcare, and real estate sectors.

Citi experts explained, “The energy sector was the only one to experience negative flows from long-term managers over the past two months, while financials, technology, and consumer discretionary sectors saw the largest positive inflows.”

At the same time, hedge funds continued to focus on selling throughout the week, with limited exceptions in a few sectors that saw positive net inflows. Specifically, hedge funds increased their exposure to the financial, healthcare, and energy sectors, while the largest negative flows occurred in consumer staples, technology, and industrial sectors.

The report also highlighted some changes in the relative value model based on flow movements, with technology rising to replace real estate among the top three performing sectors. On the other hand, the utilities and materials sectors dropped to the bottom rankings, replacing technology and communications.

According to the report from Citi Bank, recent market movements suggest a shift in pricing patterns since the end of last week. Interestingly, current price behavior reflects a combination of “early recession” characteristics, as seen in the underperformance of the energy and technology sectors, and “late recession” dynamics, where cyclical sectors outperform defensive ones.

Finally, major Wall Street indices, such as the S&P 500 and Dow Jones, closed at record highs on Tuesday, surpassing negative consumer confidence expectations. This performance was bolstered by a surge in mining stocks following China’s announcement of a massive stimulus package aimed at supporting economic growth.

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