Exit from hedge funds is accelerating: Goldman Sachs pointed to the pandemic period.

Goldman Sachs (GS) reported that hedge funds have exited their stock positions at the highest level in over two years. This situation reveals a scenario similar to March 2020, when funds reduced their risks in the early days of the COVID-19 pandemic. Concerns that U.S. President Donald Trump's tariff policies could push the country into recession are emerging as the main reason for this market movement.

Hedge Fund Leverage Reduction Crisis
There were sharp declines in U.S. stock indices yesterday. While the Nasdaq lost nearly 4% in value, the S&P 500 index fell by 2.7%, marking its largest daily loss of the year. James Koutoulas, CEO of Typhon Capital Management, stated that the movement is a "classic leverage reduction crisis." According to Koutoulas, funds rapidly reduced their positions due to increasing uncertainties.

Citi Downgrades Recommendation for U.S. Stocks
Citi analysts downgraded their recommendation for U.S. stocks from "overweight" to "neutral" due to rising recession concerns. Citi believes that the U.S. economy will not perform better than the global economy in the coming months. This decision came after the Nasdaq experienced its sharpest daily drop since 2022. Dirk Willer, Citi's global macro and asset allocation head, noted that the S&P 500 falling below its 200-day moving average and the weak performance of market-leading stocks influenced the recommendation change.

European Banks Enter 2025 with Strong Profits
Fitch reported that leading banks in Europe are entering 2025 with strong profits and solid capital structures. This situation provides banks with strategic flexibility in evaluating merger and acquisition opportunities. There is an expectation of increased mergers and acquisitions, particularly in Italy and smaller European markets. UniCredit, ING, and BBVA aim to grow through acquisitions, while Benelux, French, and Scandinavian banks are focusing on additional deals to strengthen their market positions and improve diversification. Fitch emphasized that European banks have increased their profitability through cost savings and digital investments despite the decline in interest rates.