JPMorgan Says Hedge Funds, Not Foreigners, Are Behind Stock Selloff

​The recent U.S. stock market selloff may look like a global exodus—but it’s actually hedge funds doing the heavy lifting, not foreign investors, according to JPMorgan.

Despite widespread speculation that international investors were fleeing U.S. markets due to Trump’s tariff revival and geopolitical volatility, JPMorgan’s analysts say the data tells a different story. Foreign buying of U.S. equities totaled $24 billion in February, more than offsetting January’s $13 billion outflow.

So who’s dumping stocks? JPMorgan points to equity-focused hedge funds, especially algorithmic and momentum-driven traders, who have unloaded an estimated $750 billion in U.S. equities so far in 2025.

The biggest selling came from Commodity Trading Advisors (CTAs) and other trend-following funds, which flipped from massive long positions in mid-February to aggressive shorts by early April—unloading about $450 billion in the process.

There’s also been a spike in short interest in SPY (the S&P 500 ETF) and smaller-cap stocks, confirming that hedge funds—not long-term investors—are driving the retreat.

Retail investors, on the other hand, have been net buyers, scooping up what they view as discounted bargains at a clip of $50 billion per month, especially through ETFs. They’ve also been rotating into European stocks and gold ETFs, likely seeking diversification and safety.

JPMorgan believes the hedge fund exodus reflects broad de-risking rather than a coordinated shift to non-U.S. markets, although some capital has rotated into Europe and China.

Bottom line: While headlines scream about foreign capital flight, JPMorgan says the real story is closer to home—algorithmic hedge funds are slamming the sell button, and that’s what’s been shaking the market. Retail investors, meanwhile, are still holding the line.







​