Hedge funds are trading in their AI stocks for 2 sectors, marking their largest tilt in a decade

Shutterstock

• Investors are shifting to small caps ahead of the Fed's first rate cuts of the cycle.
• Hedge funds are now overweight mid- and small-caps, moving away from mega-cap tech leaders.
• Financials, healthcare, and utilities are the new favorites, with notable gains in financials.

'Tis the season for sector rotations. But where's everyone going?

The broad market is rushing into small caps in anticipation of this cycle's first Fed rate cuts.

The Russell 2000...