In a recent report from Goldman Sachs, it was revealed that hedge funds have turned their attention back to banks, insurance, and trading firms, purchasing their stocks at the highest rate since June 2023. After several weeks of net selling positions, financial sector stocks have once again become the favored investment for hedge funds.

The report, released on Friday and viewed by Reuters on Monday, detailed the trading activity on Goldman Sachs' prime brokerage trading desk, which caters to hedge funds and monitors their transactions. The note highlighted that the majority of these recent bets were long positions, indicating the funds' optimism for an upward trajectory in the prices of these assets.

Notably, the STOXX 600 banking index in Europe experienced a rise of approximately 1.9% during the week ending last Friday, while the Dow Jones banking index saw a decline of 1.6% for the same period. The buying spree by hedge funds predominantly took place in North America and Europe, with a focus on banks, insurance companies, and capital markets firms involved in trade facilitation.

Conversely, hedge funds made moderate sell-offs of stocks in consumer finance companies and mortgage trust firms, according to the Goldman Sachs note. Overall, it was observed that hedge funds took more sell positions in global equities, marking the ninth consecutive week of such activity and the quickest pace recorded in five months.

Despite this trend, stock-picking hedge funds managed to achieve a weekly performance gain of 0.42%, partially driven by the overall surge in equity markets. The S&P 500 index climbed over 4% last week, while the broadest European stock index witnessed a rise of 1.85%. Conversely, systematic stock traders experienced a negative performance of -0.18% for the week ending September 13th, as stated in the note.

The renewed interest in financial sector stocks by hedge funds indicates a more optimistic outlook on the industry's performance. As the market continues to evolve, it remains to be seen whether this trend will continue or if new investment preferences will take center stage in the coming weeks.