Hedge funds are preparing for further sales

Michael M. James (Getty Images/AFP/Scanpix)

Hedge fund betting indicates that their managers are preparing for further downturns in markets that are already targeting only the worst half in decades.

In mid-June, the difference (even exposure) between US hedge funds’ long positions (expected to rise in price) and short positions (expected to fall in price) was the smallest since 2010, according to an analysis by Morgan Stanley, which quotes the Financial Times .

In turn, the difference between the long and short positions of the European and Asian hedge funds was the smallest in recent years.

This indicates that, in general, hedge fund managers are still cautious, and there is considerable room for further price reductions. This positioning of hedge funds is taking place despite the fact that the first half of the year for stock markets is one of the worst in decades. The US stock index S&P 500 has already fallen by almost 18% this year, the European stock index STOXX 600 by 14%.

As already announced, Bridgewater Associates, the world’s largest hedge fund manager, has a particularly large short position in European equities.

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