Hedge funds and institutional investors have reduced their exposure to U.S. equities at an unprecedented pace, with global fund managers' allocation to U.S. equities dropping by 40 percentage points between February and March to a net 23% underweight, the lowest level since June 2023. Hedge funds have sold U.S. equities in 10 of the last 11 weeks, bringing their long/short ratio to the lowest level in at least five years. Cash allocation among fund managers rose to 4.1% in March, up from a 15-year low of 3.5% in February. The Magnificent 7 stocks—Apple, Amazon, Google, Meta, Microsoft, Nvidia, and Tesla—have seen hedge fund exposure fall to a two-year low, with the group collectively losing $3.3 trillion in market capitalization and declining by 20%. U.S. leveraged long ETFs also saw a $15 billion drop in assets under management, reaching the lowest level since Q1 2024. Global investors have shifted focus to European equities, with exposure to European stocks rising sharply. Hedge funds have been net buyers of European equities in recent weeks, while allocations to global equities overall have dropped by 29 percentage points, the fifth-largest decline on record. Despite the sell-off, Goldman Sachs predicts a potential rebound in U.S. equities over the next three months, citing its proprietary sentiment indicator, which has historically preceded gains in the S&P 500. However, the sharp reduction in hedge fund leverage and rising cash levels among institutional investors suggest continued caution in the market.