NEW YORK: Hedge funds, whose bearish bets on stockshave held their returns to half the Standard & Poor's 500 Index in 2013, pushed short sales close to the highest level of the year just as the US budget impasse spurred a doubling in volatility. Rising bets against equities sent a gauge of manager bullishness compiled by ISI Group within 0.2 point of its lowest reading in 2013 last week.
Short sales have backfired as the S&P 500, up 19% this year, posts one of its broadest rallies on record. The embrace of bearish trades has squeezed returns for professionals and is one reason stocks have repeatedly rallied in 2013 amid slowing economic and profit growth, according to Cambiar Investors and Pension Partners. Rather than falling, shares that investors have shorted the most are up 38% since January, a consequence of forced buying during rallies by speculators who borrowed and sold them, data compiled by Goldman Sachs Group Inc. show.
"There still are people out there who are convinced the whole market and financial system is some house of cards," said Brian Barish, president of Denver-based Cambiar Investors, which manages about $8 billion, said. "I think they wind up shooting themselves and their investors in the foot with the permabear mentality, but it persists." Senate leaders struggled to draft an accord over the weekend that averts a US default and restores full government operations.
Senate Majority Leader Harry Reid, who started talks with Minority Leader Mitch McConnell, said the two had "a productive conversation" on Sunday. Democrats have warned that a lack of movement this weekend may have an effect on financial markets. "We ended the week on a pretty upbeat note with relatively high expectations that a deal to end the government shutdown was pretty near," Oliver Pursche, who helps manage $850 million as president of Gary Goldberg Financial Services said.
"By yesterday (Sunday) afternoon , it was pretty clear that there was still a lot of work to do. That's a disappointment and you're seeing that natural reaction from the market."
Short sales have backfired as the S&P 500, up 19% this year, posts one of its broadest rallies on record. The embrace of bearish trades has squeezed returns for professionals and is one reason stocks have repeatedly rallied in 2013 amid slowing economic and profit growth, according to Cambiar Investors and Pension Partners. Rather than falling, shares that investors have shorted the most are up 38% since January, a consequence of forced buying during rallies by speculators who borrowed and sold them, data compiled by Goldman Sachs Group Inc. show.
"There still are people out there who are convinced the whole market and financial system is some house of cards," said Brian Barish, president of Denver-based Cambiar Investors, which manages about $8 billion, said. "I think they wind up shooting themselves and their investors in the foot with the permabear mentality, but it persists." Senate leaders struggled to draft an accord over the weekend that averts a US default and restores full government operations.
Senate Majority Leader Harry Reid, who started talks with Minority Leader Mitch McConnell, said the two had "a productive conversation" on Sunday. Democrats have warned that a lack of movement this weekend may have an effect on financial markets. "We ended the week on a pretty upbeat note with relatively high expectations that a deal to end the government shutdown was pretty near," Oliver Pursche, who helps manage $850 million as president of Gary Goldberg Financial Services said.
"By yesterday (Sunday) afternoon , it was pretty clear that there was still a lot of work to do. That's a disappointment and you're seeing that natural reaction from the market."
No comments:
Post a Comment