Industrial stocks, one of this year’s biggest market winners, appear to be the target of hedge funds’ next big short. The group was among the worst performing sectors last week, with heavy short selling outpacing long buys by roughly 2.5 to 1, according to the latest Prime Services Weekly Report from Goldman Sachs. The numbers, from the week of Aug. 29 to Sept. 4, compile positioning data from the firm’s prime brokerage clients, typically hedge funds. The data showed notional short selling of U.S. industrial stocks was the largest in more than five years, the Wall Street investment bank said. It affected most subsectors, including ground transportation, aerospace and defense, and professional services. Those trads were made ahead of Friday’s big jobs report for August, which showed the labor market weakening. Industrial stocks, including companies such as Caterpillar and Boeing that make heavy goods that power the real economy, are regarded as cyclical, rising and falling depending on the wider economic outlook. XLI 5D mountain Industrial Select Sector SPDR Fund (XLI) over past five days Short selling the group could mean investors are starting to lose faith in the broader economy, betting that an economic downturn will translate into less investment in durable, manufactured goods. It could also mean that hedge funds find that industrials — which FactSet data shows are trading at roughly 23 times forward P/E, slightly more than the S & P 500 — might be overvalued. That could dent the gains in one of this year’s notable stock market leaders. Industrials have risen roughly 14% in 2025, compared to the S & P 500’s 10% advance, as investors count on the artificial intelligence buildout and the U.S. economy’s continued expansion. Industrials are the second best performing sector in the broader index this year, behind only communication services (which includes Alphabet , Meta Platforms and Netflix . On Friday, industrials fell 0.4%. On Monday, the sector briefly fell as much as 0.5% in early trading before rebounding at midday.