Hedge funds have bet billions of dollars against Donald Trump’s America amid fears of a market crash.
Data from Goldman Sachs show there has been a surge in “short” bets against US stocks, meaning traders will make money when they fall in value, in a sign of growing concerns about the market.
In January, investors have placed 10 times more bets on US stocks falling than equivalent bets that shares in leading American companies would rise, the investment bank said. It suggests many traders are sitting on huge profits from the chaos earlier this week, when shares in big tech stocks slumped following a panic over the success of rival Chinese AI DeepSeek .
The increase in short bets marks a major turnaround in sentiment from November, when hedge funds piled into long bets on US stocks, predicting they would rise.
Hedge funds ploughed billions into so-called “Trump trades” in the immediate wake of the US election in November, on expectations the new president’s tax cuts and tariff policies would boost America’s economy.
A surge in clients giving their money to the funds in the wake of Mr Trump’s victory helped lift the amount of money managed by the industry to all-time highs of over $4.5 trillion (£3.6 trillion).
Mr Trump has also received significant support from high profile fund chiefs, including Bill Ackman, who has become a major opponent to diversity, equity and inclusion (DEI) initiatives since the Oct 7 2023 attacks on Israel.
In the run-up to the elections, Mr Ackman, who founded Pershing Square Capital Management in 2004, publicly endorsed Mr Trump. The billionaire hedge fund manager had previously donated millions to Super PAC organisations supportive of the Democratic Party.
Mr Trump subsequently appointed hedge fund manager and Republican Party donor Scott Bessent as his treasury secretary. Mr Bessent started his career at George Soros’s hedge fund in the 1990s before launching his own investment fund Key Square Group in 2015.
Ken Griffin, who founded Citadel in 1990, later also came out in support of Mr Trump in December, having held back from financially supporting the Republican candidate’s campaign. Mr Griffin, who has donated millions to various Republican candidates and political, had earlier described Mr Trump as a “three-time loser.”
Speaking at the DealBook summit in December, Mr Griffin said Trump’s victory posed an opportunity to end the “regulatory and litigation-induced paralysis” of the Biden era and “bring America back to a nation of principles, of strength, of prosperity and possibility,” according to Politico.
‘Uncertainties persist about Trump’
Individual hedge funds do not typically make their positions public, so it is not known if any of the above are shorting the US market.
Bruno Schneller, managing partner at asset manager Erlen Capital Management, said the increase in short bets against US stocks likely reflect concerns about “macroeconomic uncertainty.”
Analysts at Swiss bank UBS, led by Karim Cherif, head of alternative investments, said: “As the new year unfolds, uncertainties persist regarding Trump’s policies, the global economic trajectory, and central bank actions.”
Separately, Elliott Management, which controls more than $70bn worth of investments, this week warned that Mr Trump’s presidency was fuelling speculative bubbles in markets that threaten to “wreak havoc” if markets crash, according to the Financial Times.
The concerns come as the “magnificent seven” tech companies – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla – have seen their stock prices surge over the past two years on excitement surrounding artificial intelligence (AI).
Investors have become increasingly concerned about over-investment in leading technology companies. The launch of DeepSeek’s new chatbot earlier this month has heightened those concerns.
This week, concerns surrounding DeepSeek led a major sell-off of stocks in top American tech companies, including computer chip maker Nvidia, which saw almost $600bn knocked off its valuation .
DeepSeek itself is owned by Chinese hedge fund High Flyer, which uses algorithmic trading techniques to place bets on market movements. Liang Wenfeng, High Flyer’s chief executive, is also DeepSeek’s chief executive.
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