As the US earnings season commences this week, hedge funds have accelerated their portfolio shifts by offloading bank stocks while aggressively accumulating consumer staples at the fastest pace in nearly two years, according to Goldman Sachs data.

The record-breaking rally in US equities faces a critical test this week with major banks kicking off Q2 earnings reports and the release of June US consumer price data on Tuesday.

Goldman's prime brokerage division revealed that hedge funds sold long positions in US banks and global financial services firms for the second consecutive week. These investors simultaneously liquidated European financial longs while building short positions. Banks, financial services providers, and insurers faced net selling pressure, though trading and consumer finance companies saw net buying.

Simultaneously, speculators rushed into consumer staples – the worst-performing S&P 500 sector last week. This category includes recession-resistant products like beverages, food, and tobacco.

Upcoming quarterly reports are expected to reveal the financial impact of US tariff policies on corporate America and the broader economy. "Should tariffs escalate on August 1 and the jobs report disappoint, recession fears could easily reignite," warned Deutsche Bank analyst Henry Allen.

Notably, consumer staples emerged as July's most net-bought sector. Despite a 1.8% decline this month, global systematic equity hedge funds remain up over 10% year-to-date. Discretionary stock-picking funds held steady month-to-date with 6.6% annual returns.