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Trump expected to publish most ambitious tariff plans yet

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US markets should rally over next year after initial dip,

Goldman Sachs ( GS ) says

By Nell Mackenzie

LONDON, April 1 (Reuters) - Hedge funds have scaled back

risky bets and sought safety, data from Goldman Sachs ( GS )

shows, ahead of this week's widely anticipated announcement by

U.S. President Donald Trump on reciprocal tariffs that has

fuelled trade war fears.

Trump has for weeks flagged April 2 as a "Liberation Day"

delivery date for his most ambitious actions yet to upend more

than half a century of global trade norms, which saw barriers to

international commerce fall, but in ways the president believes

disadvantaged American goods and workers.

White House aides have drafted plans for tariffs of about

20% on most of the $3 trillion of goods imported annually to the

U.S., the Washington Post reported on Tuesday.

Higher tariffs and lower earnings estimates are likely to

shrink the S&P 500's three-month returns by 5%, but U.S. markets

should recover over the next year, a Goldman client note on

Monday and seen by Reuters on Tuesday showed.

Here's what Goldman Sachs ( GS ) prime brokerage says about hedge

fund positioning. A prime brokerage desk lends money to hedge

funds for trading and tracks their activities.

1/ RETREAT

Hedge funds have reduced their net exposure across all

regions, especially in Europe, followed by emerging markets and

Asia.

The amount traded on transparent and non-transparent stock

exchanges trended lower in March, shows data from BMLL

Technologies, bar a large options expiry on March 21. Such dates

often see larger volumes traded as the derivatives that trade

off their prices are closed.

2/ AVOID EMERGING MARKETS

Hedge funds have sold out of major emerging markets.

And so far this year, they have maintained more short than

long positions in emerging market stocks in Latin America and

Asia.

In Asia, stocks have been particularly sold in large amounts

in March, Goldman Sachs ( GS ) data showed. A short position expects an

asset price to decline, a long bet hopes it will rise.

3/ CYCLING OUT OF CYCLICALS

Hedge funds have cut their positions in stocks whose

performance is closely tied to the economic cycle. These

companies, like auto-parts manufacturers, some jewellery brands

and home furnishing stores typically struggle when consumers

have less money to spend.

That move coincides with increased concern that tariffs are

raising U.S. recession risks.

4/ U-TURN

Hedge funds have starting selling European auto stocks,

having snapped them up until early March, the Goldman data

showed.

Speculators have piled into short positions on the sector

since Trump last week made public a plan to implement a 25%

tariff on imported cars and light trucks from April 3. A duty on

auto parts begins on May 3.

The ratio of long positions compared to short bets against

the auto sector are close to historic lows, said Goldman.

5/ METAL HEADS

Hedge funds have been net buyers in large amounts in recent

weeks of company stocks that are sensitive to metals prices,

said Goldman.

Hedge fund holdings in these names are at multi-year highs

said the note. The note did not mention company names.