Hedge fund managers turn extremely bullish on US equities |
Date: Wednesday, December 29, 2010
Author: Hedgeweek
About 46% of the 92 hedge fund managers
the firms surveyed in the past week are bullish on the S&P 500,
while only 19% are bearish. “These bullish and bearish readings are the highest and lowest,
respectively, since the inception of our survey in May,” says Sol
Waksman (pictured), founder and President of BarclayHedge. “The
enthusiasm is not surprising. Our Hedge Fund Index shows consistent
gains in 13 of the past 14 years, and hedge funds are firmly on track
for a profitable 2010.” “We are a little surprised to see precious metals top the
list,” says Deluard. “Gold funds generally took in more money in 2009
than they have received in 2010, and our flow data suggests bonds are
much more overbought than metals. Mom and pop have been dumping bond
ETFs and mutual funds for two months, but only after they poured a
staggering $705.5 billion into them between January 2009 and October
2010. If a bubble is to burst in 2011, we believe bonds are the
strongest candidate.”
About 54% of hedge fund managers are bearish on the 10-year Treasury
note, while only 14% are bullish. These readings are the highest and
lowest, respectively, since May. In contrast, 39% of managers are
bullish on the US dollar index, while only 13% are bearish. These
readings are also the highest and lowest since May. Meanwhile, 23% of
managers aim to lever up in the coming weeks, the largest share in six
months.
“Managers are betting aggressively on the economic recovery,” says
Vincent Deluard, Executive Vice President at TrimTabs. “While markets
spent most of 2010 oscillating between overblown fears of a double-dip
recession and irrational exuberance about a V-shaped recovery, an
inflationary growth consensus has emerged heading into 2011. Moreover,
the fact that every sentiment measure under the sun shows sky-high
confidence could indicate that investors are a touch too jubilant. The
bandwagon might be overly packed.”
About half of managers attribute higher Treasury yields to expectations
of higher inflation and stronger economic growth, while only 4% cite the
negative debt implications of the extension of the Bush tax cuts.
Meanwhile, a majority of managers feels precious metals are the most
overbought asset.