Hedge funds regain appetite for US stocks, feel full of Europe, Asia
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.
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.
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.
(Reporting by Carolina Mandl in New York; Editing by David Gregorio)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Arabian Post
16 minutes ago
- Arabian Post
Global Trade Finance Gap Targeted by DP World–JPMorgan Deal
Arabian Post Staff -Dubai DP World Trade Finance and JPMorgan have struck an alliance designed to improve working capital availability in emerging economies, responding to an estimated global trade finance shortfall of US $2.5 trillion. The partnership combines DP World's logistics capabilities with JPMorgan's financial services to distribute risk on trade finance deals, ensuring underserved enterprises can access vital credit. The signature transaction under this collaboration financed a leading food company's procurement of cocoa from Côte d'Ivoire, unlocking more than US $70 million in annual sourcing. By investing working capital at scale, the deal bolstered local supply chains and stimulated financial flows in a region frequently sidelined by banks due to weak credit data. ADVERTISEMENT Raj Jit Singh Wallia, Board Member at DP World Trade Finance, emphasised the structure of the model: 'By leveraging risk‑sharing mechanisms and combining them with logistics in one ecosystem, we reduce the overall credit risk profile and enhance liquidity in emerging markets'. His comments highlight DP World's strategy to fuse its global infrastructure with financing support, catalysing smoother transactions across regions including Sub‑Saharan Africa and Central Asia. James Fraser, Global Head of Trade & Working Capital at JPMorgan, noted that the bank's participation allows the pair to 'offer innovative financing solutions that provide working capital to businesses while mitigating risk through DP World's expertise'. Fraser added the partnership seeks to expand structured trade finance offerings in key emerging markets, aligning with JPMorgan's wider corporate strategy of fostering inclusive global commerce. The global trade finance deficit disproportionately impacts small‑ and mid‑sized enterprises in developing markets. Traditional lenders often abstain from financing these firms due to limited credit histories. The DP World–JPMorgan model directly addresses this, using logistics data and institutional backing to underwrite financing where conventional metrics fall short. Experts say such initiatives are gaining traction. Trade finance innovators like fintech firms Wisers and Drip Capital have already used data analytics and invoice financing to support SMEs in India, Mexico and the United States. DP World's initiative mirrors this trend but at a larger scale by leveraging its global footprint alongside JPMorgan's capital. Industry analysts observe that although supply chain disruptions—triggered by geopolitical events and climate‑related risks—persist, access to credit remains a primary bottleneck for sustained trade growth. Finance‑logistics alliances offer one solution, but scalability and consistency depend on transparent data-sharing and regulatory cooperation in host countries. Regulators in major markets are taking note. Some central banks in Africa and Central Asia have pledged to promote digitised trade documentation and credit scoring tools, easing risk assessments for financiers. While DP World and JPMorgan refrain from naming future markets, signals suggest possible pilot expansions into Southeast Asia and Latin America. A senior trade economist noted that combining logistics visibility with credit issuance 'can de-risk deals that would otherwise be considered too small or opaque for global banks'. In such models, DP World's shipment tracking and trade flow datasets underpin underwriting, while JPMorgan's funds back the exposure. Critics argue that deeper structural obstacles remain: SMEs require improvements in digital infrastructure, regulatory certainty, and legal frameworks before enduring scaled lending becomes viable. Risk pooling alone may not overcome entrenched informality in supply chains. Nevertheless, proponents suggest that DP World's ecosystem model could serve as a blueprint for other logistics companies to co‑finance trade flows. As global trade recovers from pandemic‑related disruptions and realigns with new geopolitical realities, mechanisms enabling more equitable trade inclusion are gaining importance. With its pre‑existing port and inland logistics network, DP World offers JPMorgan market penetration and risk diversification, while the bank adds financial credibility.
Zawya
an hour ago
- Zawya
ECB's Escriva sees scope for minor monetary policy easing
MADRID - The path of monetary policy easing in the euro zone could require further adjustments if the current macroeconomic and inflation outlooks are confirmed, ECB policymaker Jose Luis Escriva said. Last week, the ECB cut interest rates and hinted at a pause after inflation in the euro zone returned to its 2% target. Escriva, who is also Bank of Spain Governor, said in an interview to newspaper El Pais on Sunday that he "was very comfortable" with the current, gradual approach of successive 25-basis-point rate cuts. "Our central scenario – GDP growth of around 1%, inflation of 2% – could require some fine-tuning if it is confirmed," Escriva. The ECB has cut rates 2 percentage points since last June, to prop up a euro zone economy also hit by erratic U.S. economic and trade policies. Escriva said confidence in the dollar and U.S. assets had decreased since U.S. President Donald Trump took office and that since April, the dollar had not been a "safe haven" and its dominance as a global reserve currency appeared to have peaked. He also said the Bank of Spain was expected to revise downwards on Tuesday the forecast for Spanish economic growth by a few decimal points from the current 2.7% for 2025.
Economy ME
an hour ago
- Economy ME
Crude oil prices steady above $66.4 as market eyes U.S.-China trade discussions
Oil prices maintained the gains achieved last week early on Monday as investors awaited the U.S.-China trade discussions scheduled to take place in London later in the day. Brent crude futures remained steady at $66.47 a barrel at 00:08 GMT (now trading above $66.4). Meanwhile, U.S. West Texas Intermediate crude saw a slight increase of 1 cent, trading at $64.59 (currently above $64.5). Both contracts experienced an increase of more than 4 percent last week, buoyed by a better-than-expected U.S. jobs report and renewed trade negotiations between the U.S. and China, which alleviated concerns regarding a potential global economic downturn. The potential for a U.S.-China trade agreement lent support to oil prices, as three of Donald Trump's senior aides were scheduled to meet with their counterparts in London on Monday for the inaugural session of the U.S.-China economic and trade consultation mechanism. This announcement on Saturday followed an unusual Thursday call between the top leaders of both nations, who are under pressure to ease tensions due to China's export restrictions on rare earths, which have been disrupting global supply chains. Oil prices marked their first weekly gain in three weeks following this news. Read more: Crude oil prices fall to $65.40 as OPEC+ output rises despite concerns over Canadian supply China's economic data release Adding to the market's caution, China is set to release a series of economic data early Monday, including inflation and export statistics, amidst worries about the robustness of domestic demand in the world's second-largest economy. Weak trade data, coupled with the ramifications of ongoing U.S. tariffs, continue to impact Chinese manufacturing and export competitiveness. The prevailing subdued sentiment reflects investors' wait-and-see approach, with overall market mood dependent on the outcomes of Monday's diplomatic discussions in London. The inflation data from China on Monday morning will provide insights into domestic demand from the world's largest crude importer. The anticipated economic data and the possibility of a trade agreement that could bolster economic growth and enhance oil demand outweighed concerns surrounding increased OPEC+ supply, following the group's announcement of another significant output increase for July on May 31. HSBC projects that OPEC+ will likely accelerate supply hikes in August and September, which could elevate downside risks to the bank's forecast of $65 per barrel for Brent crude in the fourth quarter of 2025, according to a research note released on Friday. Reuters reported, citing researchers from Capital Economics, that they believe this 'new faster pace of (OPEC+) production rises is here to stay.'
