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Business Journals
10 hours ago
- Business
- Business Journals
Is a long-term hedge fund strategy possible in this market?
There has never been so much brinkmanship from a U.S. administration in modern times. The first month of executive orders has produced a cyclone of speculation and a great deal of action and reaction. The U.S. recently enacted tariffs on Canada, Mexico, and China. Within one day, the first two were paused. Such moves have injected a great deal of volatility into markets. Conflicting business policies continue to add to the uncertainty and volatility. How can hedge fund managers hold to a medium- to long-term strategy in a world where so much is uncertain? In this article, we look at how fund managers have been preparing and will continue to respond by lowering their beta exposure. The current state of hedge fund activity Hedge funds began the year divesting from equities. This culminated in a selloff the Friday before the new tariffs where hedge funds 'sold nine of 11 sectors in the S&P,' reported Bloomberg. The most-sold groups included: Consumer discretionary Industrials Financials Energy Communication services Information technology Meanwhile, retail investors bet the opposite. As fund managers sold stocks, retail investors poured $2.1 billion into equities. The market dropped upon news of the tariffs, though less than expected. Futures fell — the Nasdaq composite, 2.35%, and the S&P, 1.7%. It is clear everyone is reading the room differently and holds a wide variety of views on the long-term health of the U.S. economy. On the one hand, JP Morgan Chase announced that it expected tariffs to lower U.S. growth by 0.5%-1% and raise inflation by that same amount. On the other, a Feb. 3 Gallup poll found consumers buoyant. Sixty-one percent expect stocks to rise in value, the most since Gallup began including that question in 2001. Yet, is it worth asking how useful projections, even when given sweeping tariffs, can be paused the next day? What is the long-term effect of those partnerships? Reuters asked fund managers why they were not more aggressive in the administration's first few weeks. Several said they were hesitant to 'get sucked in,' which appears to be trumping the fear of missing out. Many are hedging and investing in bonds and treasuries. "Either inflation comes down and you get hit on margins, or it doesn't, and the Fed hits you because it doesn't cut (rates)," Matt Smith, investment director at Ruffer LLP told Reuters. "We are at our lowest equity weight." Hedge funds have been readying for this market Hedge funds prepared for this presidency with their highest borrowing levels since 2010. They expect the dollar to continue to rise and protectionist policies to have some upsides for the U.S. economy. They also expect to benefit from the Trump administration's promise to maintain lower taxes — notably, corporate taxes and the capital gains tax, via extension of the expiring 2017 Tax Cuts and Jobs Act (TCJA) – though the administration's proposal on taxing of carried interest is not a favorable one for fund managers. Hedge funds are adjusting their strategies in four ways: Reducing their beta exposure As they say, predictions are difficult, especially about the future. Right now, it feels even more fraught. As tariffs and the president's 60+ executive orders (and counting) show, we can likely expect many quick policy decisions and reversals without warning. In response, Reuters reports that hedge fund managers are reducing the portion of their portfolio dedicated to beta investments to between 15%-5%, down from an average of 20%. Managers want less exposure to technology stocks Tariffs aside, stock market routs like the one that followed news of China's AI DeepSeek have managers on edge. As DeepSeek panic spread, the chipmaker Nvidia shed $600 billion in market cap. Since the industry has shifted to AI models, fortunes seem to rise and fall faster. Managers want less exposure to emerging markets The administration's protectionist policies seem certain to favor the dollar at the expense of our trading partners. They also favor reshoring operations. This makes it difficult to gauge the long-term value of foreign investments, even if they may be more attractive. Managers are bullish on alternative investments Fifty-six percent of hedge funds now have multiple managers and more capacity to shift into alternative investment strategies. For example, real estate and healthcare – from our conversations, hedge fund managers feel all the protectionist policies and declining trade make real estate and healthcare better investments. Consider the implications of new investment strategies As hedge funds shift their investing strategies, there may be a learning curve for firms entering new territory. Managers newly entering commercial real estate will find that the standard capital stack has changed over the past few years, and mezzanine debt is preferred over equity. There also may be new tax consequences to consider. For example, municipal bonds are taxed federally unless they are tax-free, in which case they are probably still subject to state and local taxation. Citrin Cooperman's hedge fund professionals are here to support you each step of the way. If you would like to discuss your allocation strategy and the accounting and tax implications of those holdings, please contact Alexander Reyes, partner and financial services industry practice leader, at areyes@ or James Catalano, partner, at jcatalano@ Citrin Cooperman is one of the nation's largest professional services firms. Since 1979, we've steadily built our business by helping middle market companies and high net worth individuals find practical, actionable solutions to help them meet their short-term needs and long-term objectives. Our clients span a diverse array of industry and business sectors and find sustainable growth through utilizing our menu of comprehensive personal and professional services. Citrin Cooperman & Company, LLP, a licensed independent CPA firm that provides attest services and Citrin Cooperman Advisors LLC, which provides business advisory and non-attest services, operate as an alternative practice structure in accordance with the AICPA's Code of Professional Conduct and applicable law, regulations, and professional standards. For more information, please visit "Citrin Cooperman" is the brand under which Citrin Cooperman & Company, LLP, a licensed independent CPA firm, and Citrin Cooperman Advisors LLC serve clients' business needs. The two firms operate as separate legal entities in an alternative practice structure. The entities of Citrin Cooperman & Company, LLP and Citrin Cooperman Advisors LLC are independent member firms of the Moore North America, Inc. (MNA) Association, which is itself a regional member of Moore Global Network Limited (MGNL). All the firms associated with MNA are independently owned and managed entities. Their membership in, or association with, MNA should not be construed as constituting or implying any partnership between them.
The Market Online
2 days ago
- Business
- The Market Online
@ the Bell: TSX closes lower as trade fears resurface
Equities in Canada's largest centre moved lower on Friday, weighed down by renewed trade tensions after US President Donald Trump accused China on social media of breaching a tariff agreement. This concern overshadowed otherwise positive news about the country's economic growth. The telecom sector once again led gains for the TSX. Trump's claim that China violated the initial trade deal has reignited fears of a prolonged trade war between the two nations. Meanwhile, the US administration's aggressive tariff strategy remains mired in legal uncertainty. Investors are now left questioning whether a lasting trade agreement between the US and China is achievable anytime soon. The S&P finished up its best month since June 2023. The Canadian dollar traded for 72.86 cents US compared to 72.42 cents US on Thursday. US crude futures traded $0.20 lower at US$60.74 a barrel, and the Brent contract lost $0.24 to US$63.93 a barrel. The price of gold was down US$27.70 to US$3,293.72. In world markets, the Nikkei was down 467.88 points to ¥37,965.10, the Hang Seng was down 283.61 points to HK$23,289.77 the FTSE was up 55.93 points to ₤8,772.38, and the DAX was up 64.25 points to €23,997.48. The material provided in this article is for information only and should not be treated as investment advice. For full disclaimer information, please click here.
Newsweek
2 days ago
- Business
- Newsweek
The Workforce Crisis Threatening America's Economy
The U.S. lost its last remaining perfect credit rating earlier this month as Moody's elected to downgrade U.S. debt from AAA to AA1. Historically, these downgrades, first enacted by S&P in 2011 and then by Fitch in 2023, have had little material impact on the U.S. economy because of its size, and the sheer global demand for treasuries. However, they do serve as financial markets' town crier—highlighting issues that could affect the U.S. economy and further investment into it. Describing the reasons for their downgrades, S&P and Fitch cited "political brinkmanship" in the U.S. taking the form of "repeated debt-limit political standoffs and last-minute resolutions." But Moody's rationale was different. Instead of harping on politics, it pointed to two nonpartisan realities: rising entitlement spending and smaller government revenues to finance them. For many labor market experts, these findings are old news. The U.S. faces a growing shortfall of entrants to the labor force who can replace those retiring from it. For the past three years, the U.S. Bureau of Labor Statistics has downgraded its forecasts of total employment growth, citing an aging U.S. population and declining labor force participation. In fact, one study by Lightcast projected that U.S. population growth will outpace labor force growth by eight to one in 2032. This means there will be increased demand for government programs such as Social Security and Medicare, but fewer workers to fund them. Such trends have wreaked havoc on other countries. For example, France had 2.1 workers paying into its pension system for every retiree in 2000. In 2023, just 1.2 workers were supporting every retiree. When the government attempted to alter an unsustainable status quo by raising the age of retirement, it triggered severe protests throughout the country. France is not facing these dire straits alone. Between 2000 and 2022, the worker-to-retiree ratio for Europe has decreased from 4.9 to 2.9. In China and Japan, an aging population coupled with a shrinking labor force has drastically reduced economic activity over the past decade, forcing both nations to enact significant cutbacks in government spending. People affiliated with the 50501 movement march through downtown Detroit, Michigan on Saturday, April 19, 2025, to protest the Trump administration on the 250th anniversary of the start of the American Revolution. People affiliated with the 50501 movement march through downtown Detroit, Michigan on Saturday, April 19, 2025, to protest the Trump administration on the 250th anniversary of the start of the American Revolution. DOMINIC GWINN/Middle East Image/AFP/Getty Images Unlike its peers, the U.S. has yet to meaningfully address these issues due to its political paralysis. Reforming the entitlements system through Social Security and Medicare reform, increasing labor force participation by changing immigration policy, and even incentivizing companies to hire more workers by updating the tax code are considered near-insurmountable tasks for a Congress defined by partisan gridlock. Social Security was last reformed in 1983; immigration policy was last changed in 1986; and the tax code was last updated in 2017. With the federal government unlikely to address the shortfall of workers needed to sustain a growing demand for entitlements, it is no wonder the U.S.' creditworthiness is declining. But there are plenty of opportunities for improvement. As of April 2025, 7.2 million Americans are out of the labor force but would like to be employed, while 10.7 percent of young adults aged 16 to 24 are not in employment, education, or training programs. Many of them do not have the skillsets or training that employers are looking for, while others have a narrow view of careers that match their background and interests. To reduce the U.S. labor shortage, we can start by reaching out to this disaffected cohort of workers through workforce development programs, especially ones that include apprenticeships, that inform young adults of the careers they can pursue and skills they must develop to earn a respectable living. Workforce development does not hold the same political cachet as addressing entitlements, immigration policy, or the tax code. Nor is it a one-stop solution for fixing the U.S.' large fiscal imbalance. But it is a meaningful, attainable step towards accommodating increased entitlement demand by maximizing the number of taxpaying workers to fund it. And by ensuring every worker has the ability to actively participate in this economy, the U.S. can prove that it is capable of following through on the tougher steps ahead to correct its fiscal deficit. Noah Yosif is Chief Economist at the American Staffing Association. The views expressed in this article are the writer's own.
Yahoo
2 days ago
- Business
- Yahoo
Ferguson Enterprises (NYSE:FERG) Declares US$1 Dividend With Payment Set For August
On May 29, 2025, Ferguson Enterprises enhanced its shareholder value by declaring a $0.83 per share dividend. Over the past month, the stock price increased by 7.82%, which aligns with broader market trends, including the S&P and Nasdaq indices' strong performances, up 6% and 10% respectively. This indicates that the company's financial strategies, such as the regularized dividend announcement, may have bolstered investor confidence amidst positive market sentiment, despite geopolitical uncertainties like renewed U.S.-China trade tensions. While the market was gaining overall, Ferguson's performance slightly outpaced the Dow's 4% rise. Every company has risks, and we've spotted 2 risks for Ferguson Enterprises you should know about. Find companies with promising cash flow potential yet trading below their fair value. Ferguson Enterprises' recent dividend announcement is expected to further enhance its long-term shareholder value, aligning with its strategic growth initiatives in HVAC and Waterworks segments. This decision may reinforce investor confidence, as indicated by the company's 7.82% share price increase over the past month. Over the longer term, Ferguson's shares have achieved a total return of 153.45% over the past five years, underscoring its robust growth compared to its 1-year negative earnings growth of 6.9% in a challenging industry backdrop. Relative to its peers, Ferguson's 1-year performance exceeded the US Trade Distributors industry, which delivered a negative return of 14.7%. However, it underperformed compared to the overall US market's 11.5% gain. Analysts' fiscal forecasts remain positive, despite current challenges. The anticipated revenue growth of 5.6% annually reflects strategic efforts, though below the broader market expectation of 8.6%. Earnings are projected to grow 10.3% per year, but the company faces risks such as deflation and competitive pressures that could impact margins. The latest dividend may reinforce the company's revenue and earnings forecasts by solidifying investor confidence and supporting analysts' price target of approximately US$194.21. Currently, Ferguson's stock trades near US$168.66, which presents a roughly 12.9% discount to this target, suggesting potential upside should the company effectively deliver on its aggressive growth strategies while mitigating execution risks. Overall, the anticipated share repurchase program further reflects management's optimism about enhancing EPS and achieving sustained shareholder value. Assess Ferguson Enterprises' future earnings estimates with our detailed growth reports. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include NYSE:FERG. This article was originally published by Simply Wall St. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@
Yahoo
2 days ago
- Business
- Yahoo
Ferguson Enterprises (NYSE:FERG) Declares US$1 Dividend With Payment Set For August
On May 29, 2025, Ferguson Enterprises enhanced its shareholder value by declaring a $0.83 per share dividend. Over the past month, the stock price increased by 7.82%, which aligns with broader market trends, including the S&P and Nasdaq indices' strong performances, up 6% and 10% respectively. This indicates that the company's financial strategies, such as the regularized dividend announcement, may have bolstered investor confidence amidst positive market sentiment, despite geopolitical uncertainties like renewed U.S.-China trade tensions. While the market was gaining overall, Ferguson's performance slightly outpaced the Dow's 4% rise. Every company has risks, and we've spotted 2 risks for Ferguson Enterprises you should know about. Find companies with promising cash flow potential yet trading below their fair value. Ferguson Enterprises' recent dividend announcement is expected to further enhance its long-term shareholder value, aligning with its strategic growth initiatives in HVAC and Waterworks segments. This decision may reinforce investor confidence, as indicated by the company's 7.82% share price increase over the past month. Over the longer term, Ferguson's shares have achieved a total return of 153.45% over the past five years, underscoring its robust growth compared to its 1-year negative earnings growth of 6.9% in a challenging industry backdrop. Relative to its peers, Ferguson's 1-year performance exceeded the US Trade Distributors industry, which delivered a negative return of 14.7%. However, it underperformed compared to the overall US market's 11.5% gain. Analysts' fiscal forecasts remain positive, despite current challenges. The anticipated revenue growth of 5.6% annually reflects strategic efforts, though below the broader market expectation of 8.6%. Earnings are projected to grow 10.3% per year, but the company faces risks such as deflation and competitive pressures that could impact margins. The latest dividend may reinforce the company's revenue and earnings forecasts by solidifying investor confidence and supporting analysts' price target of approximately US$194.21. Currently, Ferguson's stock trades near US$168.66, which presents a roughly 12.9% discount to this target, suggesting potential upside should the company effectively deliver on its aggressive growth strategies while mitigating execution risks. Overall, the anticipated share repurchase program further reflects management's optimism about enhancing EPS and achieving sustained shareholder value. Assess Ferguson Enterprises' future earnings estimates with our detailed growth reports. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include NYSE:FERG. This article was originally published by Simply Wall St. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@
