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Hedge funds tracked by Goldman Sachs have boosted exposure to tech megacaps, with their long/short ratio in the group climbing to 20.5% from a low of 14% reached earlier this month. While the tilt trails peak levels seen last year, it flies in the face of the more widely held notion that the tech giants won’t be able to sustain their robust gains as the recovery broadens out.

Those turning more cautious on tech include Sean Darby of Jefferies and Savita Subramanian at Bank of America Corp. In a survey this month, the bank’s money managers said they’ve reduced tech allocation to a two-year low while pouring money into banks, small-caps and energy shares — companies seen benefiting the most from an economic rebound.

To Gene Goldman, chief investment officer at Cetera Financial Group, the latest rush by hedge funds in tech buying is likely a tactical move to brace for positive earnings surprises in coming weeks. Viewed from a wider lens, he said, these behemoths face two major headwinds: potentially higher interest rates that hurt richly valued stocks and intensified government regulations.

“There’s near-term optimism, almost like a last hurrah,” he said, adding that it comes “before rising rates and any of the concerns around big tech with a Democratic government slows it down.”

A rotation away from the stay-at-home trade makes sense amid the progress in vaccines and government aids. Profits for industries from energy to industrials are forecast to snap back this year, delivering the faster expansions in the S&P 500.


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