{"id":20897,"date":"2023-04-24T12:29:54","date_gmt":"2023-04-24T12:29:54","guid":{"rendered":"http:\/\/lynettelockhart.com\/client\/column-funds-ignore-wall-streets\/"},"modified":"2023-04-24T12:33:25","modified_gmt":"2023-04-24T12:33:25","slug":"funds-ignore-wall-streets","status":"publish","type":"post","link":"http:\/\/lynettelockhart.com\/client\/funds-ignore-wall-streets\/","title":{"rendered":"Funds ignore Wall Street’s resilience, most bearish since 2011: McGeever"},"content":{"rendered":"

By Jamie McGeever<\/p>\n

ORLANDO, Florida (Reuters) -Hedge funds remain unconvinced by Wall Street’s recovery from the March banking shock and have instead amassed their biggest bet in over a decade that the S&P 500 will fall.<\/p>\n

Commodity Futures Trading Commission (CFTC) data for theweek ending Tuesday, April 18 show that funds and speculative accounts increased their net short position in S&P 500 index futures by 36,645 contracts to just over 680,000 contracts.<\/p>\n

That is the biggest net short position since October 2011, and marks the fourth week in five that funds have increased their bet on weaker U.S. stocks.<\/p>\n

A short position is essentially a wager that an asset’sprice will fall, and a long position is a bet it will rise. Hedge funds take positions in futures markets for hedgingpurposes so the CFTC data is not always reflective of purely directional bets. But it is a pretty good guide.<\/p>\n

The latest doubling down from hedge funds comes as the first quarter U.S. earnings season kicks into gear. It has been a mixed bag with almost a fifth of the S&P 500 firms having reported.<\/p>\n

Some 76% have posted earnings beats and 65% have registered revenue beats, but estimates were low to begin with.<\/p>\n

What’s more, the consensus forecast is still for a 4.7% fall in first-quarter earnings, according to IBES data from Refinitiv, which would confirm an “earnings recession” of two consecutive quarters of earnings contraction.<\/p>\n

Earnings are likely to drive market sentiment and direction in the coming week, with ‘mega tech’ firms like Alphabet and Microsoft, as well as Amazon, scheduled to report their results.<\/p>\n

In some ways, funds’ bearish outlook is justified. The economic data is mixed – Citi’s U.S. economic surprises index last week slid to a two-month low – uncertainty around banking stress persists, and debt ceiling worries are bubbling up.<\/p>\n

Goldman Sachs’s equity strategy team led by David Kostin expects the S&P 500 will end the year at 4000, implying a small decline of around 3% from current levels.<\/p>\n

But the market refuses to buckle. The S&P 500 has rebounded nearly 10% from the March banking shock lows, and if the options market is any guide, traders are sanguine about the near-term outlook.<\/p>\n

The VIX index of implied volatility – the Wall Street “fear index” – last week hit its lowest since November 2021. Not only that, at around 16.7 it is below the long-term average of any time since the index was launched in 1990.<\/p>\n

There are plausible explanations for this resilience.<\/p>\n

Bank of America’s latest fund manager survey showed U.S. equity allocation in April at a net 34% underweight, up from March but still among the most bearish positions of the past 20 years and 1.5 standard deviation below its long-term average.<\/p>\n

Hedge funds are also their most gloomy in years. Perhaps the bearish positioning is simply overdone.<\/p>\n

Diane Jaffee, lead portfolio manager at TCW, thinks so. While stocks’ attractiveness relative to bonds has diminished, they still offer better returns.<\/p>\n

“Plus you have the potential for earnings growth. Equity investors should be thinking in multiple years, not just this year,” Jaffee said.<\/p>\n

(The opinions expressed here are those of the author, a columnist for Reuters.)<\/p>\n

Related columns:<\/p>\n

Evaporating equity risk premium herds funds to bonds<\/p>\n

Markets won’t give up the ghost<\/p>\n

(By Jamie McGeever in Orlando, Florida; Editing by Christopher Cushing)<\/p>\n

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By Jamie McGeever ORLANDO, Florida (Reuters) -Hedge funds remain unconvinced by Wall Street’s recovery from the March banking shock and have instead amassed their biggest bet in over a decade that the S&P 500 will fall. Commodity Futures Trading Commission (CFTC) data for theweek ending Tuesday, April 18 show that funds and speculative accounts increased […]<\/p>\n","protected":false},"author":8,"featured_media":20898,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","footnotes":""},"categories":[1216],"tags":[1223],"class_list":["post-20897","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-u-s-economy","tag-updated"],"jetpack_featured_media_url":"http:\/\/lynettelockhart.com\/client\/wp-content\/uploads\/Reuters_Direct_Media\/USOnlineReportEconomy\/tagreuters.com2023binary_LYNXMPEJ3N00V-VIEWIMAGE.jpg","_links":{"self":[{"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/posts\/20897","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/comments?post=20897"}],"version-history":[{"count":2,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/posts\/20897\/revisions"}],"predecessor-version":[{"id":21401,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/posts\/20897\/revisions\/21401"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/media\/20898"}],"wp:attachment":[{"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/media?parent=20897"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/categories?post=20897"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/lynettelockhart.com\/client\/wp-json\/wp\/v2\/tags?post=20897"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}