Global hedge funds started to add back U.S. equities to portfolios last week following a massive selloff in Wall Street's major indexes, an early indication of optimism about the country.

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Goldman Sachs said in a separate note that after unwinding positions in U.S. stocks on March 7 and 10, hedge funds started to add exposure to the world's largest economy back for the rest of the week through Thursday.

The bank showed hedge funds added both long and short bets on U.S. stocks, adding hedge funds' global portfolios became more bearish, as the proportion of bets stocks will fall grew relative to long positions last week. In a separate note, JPMorgan disclosed the same trend.

Elsewhere, portfolio managers continued to shed risk in both Europe and Asia, Goldman added. It said European stocks were net sold at the fastest pace in over five years, as well as emerging markets in Asia.

The unwinding seen on Friday and Monday represented the largest two-day deleveraging in four years, with some activity comparable to the early days of the COVID pandemic, Reuters reported earlier.

All major U.S. indexes posted losses last week as investors grew wary of the economic outlook amid uncertainties around President Donald Trump's tariff policy.

Still, they had a comeback on Friday, with the S&P 500 up 2.18%, the Dow Jones Industrial Average up 1.74% and the Nasdaq up 2.68%.

The hedge funds' sudden comeback has different reasons, with some investors searching for bargains, while also adding bets that stocks will further decline.

Trend-following hedge funds, also known as CTAs (commodity trading advisers), are net short in U.S. equities, according to JPMorgan.

Still, Barclays said in a note on Friday that there are some signals of capitulation in the U.S. market, which could prompt some "buy the dip," although uncertainties around the tariff policy could contain the trend.

Charles Lemonides, founder of long/short equities hedge fund ValueWorks, has added long U.S. positions to his portfolio amid the selloff as he believes a 10% correction for both the Nasdaq and the S&P posed some opportunities.

"The market has been going down and extrapolating that it will continue to go down. We obviously haven't seen a recession or a real economic slowdown yet," he said.

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A 7.68% gain in the STOXX 600 this year, while the S&P 500 is down 4%, has narrowed the valuation gap between the U.S. and Europe, making the "old continent" stocks not so attractive.

Anders Hall, chief investment officer at Vanderbilt University, said hedge funds were taking a more cautious approach as, while the uncertainties around the U.S. trade policies and a potential recession are likely to remain, Europe has its own economic and political challenges.

Europe is dealing with a rearmament plan driven by fears that it can no longer count on the U.S. protection as Russia's war in Ukraine continues. Germany has announced a defense and infrastructure spending bonanza. The region also deals with tariff threats.

"The U.S. market, while not without risks, may be seen as a relatively safer bet by some," he said, adding U.S. markets are more liquid than Europe's, which can be an advantage if hedge funds have to adjust positions amid increased volatility.