Hedge funds purchased bank stocks at the fastest rate in three years last week, while taking positions against renewable electricity producers, according to a Goldman Sachs note released after Donald Trump’s US presidential election win. Financial stocks, including banks and trading companies, were the top net bought sector on Goldman’s prime brokerage trading desk.
Although the note did not specify which regional banks attracted the most interest, a second Goldman Sachs prime brokerage note, also sent Friday, pointed to potential benefits for US banks. The note cited expectations for reduced regulatory oversight under Trump’s presidency, which many anticipate will favour the financial sector. It also highlighted anticipated tax reforms that could further boost financial stocks.
“There is scope for U.S. Financials positioning to rise further,” the second note stated, adding that hedge fund interest in this sector is still below historical levels. Following the election, US bank stocks surged as much as 11.1% on November 6.
Goldman Sachs noted that long positions—bets on price increases—were predominantly in banks, consumer finance, capital markets, and financial services companies. Bullish positions centred on US equities but extended to some developing markets in Asia, while in Europe, hedge funds shifted from short to long positions.
Meanwhile, utility companies were net sold for the first time in four weeks, driven by significant short sales. Independent power and renewable electricity producers were the most heavily sold, with hedge funds holding two short positions for every long in US utility companies.