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according to media reports citing a new report released by goldman sachs on monday, as reports of layoffs at wall street banks and a reduction in investment banking transactions continued to emerge, hedge funds known as "smart money" continued to short banks and other financial stocks in the week ending last friday.

the report said financial stocks were the largest net sellers at goldman sachs' prime brokerage unit, which provides services to hedge funds around the world, as of friday's close. banks, insurance companies, publicly traded real estate investment trusts and capital markets companies that allow people to buy and sell bonds and stocks were all net sellers for the fourth straight week.

financial stocks have sold off in six of the past seven weeks, according to goldman sachs. the sell-off has been global, ostensibly led by developing markets in north america, asia and europe, the report said.

while the value of global investment banking deals rose by about a fifth, the number of mergers and acquisitions fell 25% in the year to june 25, according to data from the london stock exchange group (lseg).

goldman sachs pointed out that the financial sector has become the area with the largest net selling by institutional brokerage trading departments. this trend not only reflects investors' concerns about the current economic downturn and market uncertainty, but also reveals that hedge funds may be pessimistic about the future market trend.

"hedge fund selling was particularly pronounced in the north american market, indicating market participants' doubts about the pace of economic recovery," the report said.

goldman sachs further explained that the news of layoffs and declining trading volumes "came one after another", which not only affected investor confidence, but also posed a direct challenge to the bank's profit prospects.

"financial stocks, especially large banks, once achieved huge profits in a low-interest rate environment, but now this has failed to translate into actual profits, instead leading to increased profit pressure. this has led hedge funds to actively deploy short selling. we believe that this is an early layout for the future market trend," the bank added.

on the other hand, the goldman sachs report said hedge funds made modest net purchases in the consumer finance sector.

therefore, in general, the short-selling behavior of hedge funds to a certain extent reflects their thinking on the future economic situation, and the strategic adjustments taken as a result have a certain warning effect on investors.