Jul 9, 2025 - Business
Hedge funds skipped out on TACO Tuesday
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Hedge funds are ramping up their bets against the S&P 500, rally or not.
Why it matters: As the TACO trade roars on, institutional investors are protecting themselves against downside risk.
The big picture: Net short positions are at their most bearish level since March 2024, according to Liz Ann Sonders, chief investment strategist at Charles Schwab.
- The bearish positions increased toward the end of the second quarter, perhaps in response to the market volatility in the first half of the year, according to the chart.
- Short positions let funds profit if the market falls, serving as a hedge or a direct bet against the rally.
Between the lines: Selling in the week ending July 4 was driven primarily by institutional clients, per research from Bank of America, even as the market continued to reach new record highs.
- Hedge funds were net sellers for a third consecutive week.
- Clients sold stocks across all 11 sectors for the first time since November 2022, when investors were recovering from a bear market.
The bottom line: It's not all TACOs.
- Investors were burned in April, and part of the recovery from that may mean getting hedged up to survive any continued volatility ahead.
