By Carolina Mandl
NEW YORK (Reuters) – European hedge funds have bought defensive stocks in October, while selling cyclicals, Goldman Sachs said in a report about trading flows.
“From the start of October, we have observed a sharp rotation from cyclicals into defensives, arguably as a reaction to the macroeconomic/geopolitical environment,” the prime services strategies team wrote.
The flows illustrate how European hedge funds have become more cautious amid the Hamas-Israel war and continued uncertainty about future economic growth.
Goldman Sachs said consumer staples, healthcare and utilities are part of the defensive stocks group, while cyclicals incorporate energy, materials, industrials, financials and real estate.
Since the beginning of October, European hedge funds’ allocation to cyclicals has declined to below 2% from 7%, a graphic showed, and defensive stocks now account for almost 7% of their market value versus 6% earlier.
“Consumer staples (are) among the most net bought sectors in October so far, while discretionary names are being net sold,” the bank added. While consumer staples are those tied to more basic consumer needs, discretionary are non-essential goods, which can suffer amid economic downturns.
(Reporting by Carolina Mandl, in New York; Editing by Sharon Singleton)
