Hedge Funds Place More Bearish Bets as Storm Clouds Darken
By Kathi on Oct 15, 2021 | 04:35 AM IST
Mixed market currents,
unknowns the corporate earnings starting to come out, and the stop-and-go
COVID-19 recovery have caused hedge funds to become increasingly bearish.
According to the Business Standard, “after more than a year of futility, short
sellers just scored their fifth straight week of positive returns, their best
run since 2018”.
All of these factors -- plus
the Fed tapering policy in flux, and now the specter of inflation and supply
chain disruptions, have caused more hedge fund managers to short the market.
Steve Kolano, chief investment
officer at BNY
Mellon Investor Solution, explains: “There’s a lot of mixed currents in the
market right now…You could see a market pullback if there’s a change in
outlook.”
It’s unclear yet if the
overall market run up is due for a correction, but given short sellers’ actions
in September, the toughest month for the S&P500 since March 2020 -- wider
difficulties may be piling up. For many hedge fund short sellers, the market
disruptionc spell opportunity.
Bulls like Marko Kolanovic, a
JP Morgan Chase & Co. strategist sees the worries on skyrocketing prices as
misguided, saying the economy is on the path to a sustained recovery,
particularly since the Delta variant has slowed.
Kolanovic may have good reason
for his optimism, as news broke Friday morning that showed Goldman Sachs’ very
strong Q3 earnings, and better than expected retail data from September.
In the big picture, the split
between Steve Kolano and Marko Kolanovic represents a broader divide between
experts as seen in Investors Intelligence. A survey by the newsletter found
that institutional invesors are now evenly split on the market. This week,
those being in the bull camp have collapsed to 40.4%, while those being in the
bearish camp have surged to 37.1%, a sign that increasing pessimism is entering
the discussion.
It increasingly seems that in
today’s cloudy markets, the only thing that is certain, is more uncertainty.