The Week the Smart Money Got Whipsawed

WALL STREET’S biggest and most successful traders—the hedge funds that run billions of dollars— often thrive on stock-market unrest. This past week they floundered like everyone else— and even helped drive stocks further down.

Monday’s heated trading—when the S&P fell 2.7% and the Nasdaq dropped 4%–capped the biggest two-day flight from risk among hedge funds in four years, according to Goldman Sachs. It was one of the largest such shifts in the past 15 years.

As hedge funds rushed to the exits, their selling pressured their favorite stocks. Alibaba Group, among the most popular hedge-fund positions earlier this month, fell 5.7% Monday. Wells Fargo dropped 6%. Nvidia fell 5.1%, wiping out $139 billion in market value.

The chaos continued Tuesday. As stocks tumbled in the morning, Goldman Sachs sent a note to clients saying stock-picking hedge funds had just endured their worst 14-day period since May 2022.