Hedge funds have bailed on the U.S. consumer in a big way, Goldman Sachs data finds

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Hedge funds are betting that the U.S. consumer is in for a difficult ride.

Data from Goldman Sachs’s prime lending finds that hedge funds over the last month have moved into consumer staples while selling consumer discretionary stocks. According to the bank, short sales have outpaced long buys by a 1.4-to-1 ratio, led by increased shorting in hotels, restaurants and leisure, specialty retail and automobiles.

On specialty retail in particular, the aggregate long-to-short ratio now stands at 1.13, down from 1.35 in July, and at one-year lows, the Goldman data finds.

One measure of retail stocks, the SPDR S&P Retail ETF
has gained just 3% this year, compared to the 17% rise for the broader S&P 500
The retail ETF has dropped 17% from its high in February.

Despite fairly healthy balance sheets, there’s a number of worries, from rising delinquencies to the resumption of student-debt payments, slated to begin on Oct. 1. The most recent reporting season has seen a mixed performance, and Goldman is holding a retailing conference over the next two days, potentially a venue for executives to voice further concerns about the U.S. economy.

Bill Ackman, the hedge-fund manager who correctly made a big bet on the economy at the outset of COVID, told the Julia La Roche Show that the economy is still in good shape but that certain segments will suffer.

“The level of real interest rates is now meaningfully positive, and that’s starting to slow things down — mortgage rates are high, car payments are high, credit-card rates are high, and inflation has made things a lot more expensive,” he said. “These things will ultimately slow the economy.”


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