📈 Hedge funds increased exposure to Info Tech by +648 bp at the start of 2Q 2025, the LARGEST change of any sector.
The largest increase occurred in Semis $NVDA, $AVGO, Tech Hardware & Equipment $AAPL and Systems Software $MSFT.
Desk notes, May 2025
The desk notes of Sophos Alpha, an independent quantitative research desk. Daily market notes across many topics, including CTAs, risk parity, vol control and other systematic funds, hedge fund activity and investor sentiment, dealer gamma and liquidity, volatility and tail risk, in equities, rates, currencies and commodities.
May 2025
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🚨 The catalysts keep hitting
Trade policy relent was likely to spark a sharp and strong rally but one likely restrained by fears of renewed policy aggression.
The latest catalyst?
Trump's threat to impose 50% tariffs on imports from the E.U.
$SPX $NDX
‼️ We see back-end rates as the main risk to stocks in the short term, with the 10-year yield hovering around our key 4.50% level – the point where rate sensitivity should increase for equity markets.
Equities have shown rate sensitivity with 10Y Yield above 4.50% threshold.
Ιnitial upside breaks through this yield threshold have tended to coincide with valuation compression. $SPX $NDX
‼️ Hedge Funds initiated shorts at a RECORD PACE through May 13th, creating a sharp divergence between price and Non-Dealer net length.
$NDX
‼️ Equity positioning dipped this week after rising uninterrupted for six weeks (z-score: -0.45, 23rd percentile).
The positioning of systematic strategies continued to grind higher but remains notably underweight (z-score: -0.76, 18th percentile). $SPX
