Hedge Funds Are Ramping Up Their Exposure


  • Jason Goepfert

    Jason Goepfert

    Published: 2019-12-11 at 12:53:05 CST

Hedge funds are ramping up their stock market exposure, and the VIX "fear gauge" is rising along with stocks.

Hedge? What’s That?

For most of 2019, hedge funds employing different strategies all were seemingly avoiding stocks. Their sensitivity to movements in the S&P 500 were very low, or even negative at points during the year. That recently changed in dramatic fashion, with their estimated exposure ramping up to the highest level in years.

It’s not a perfect indicator, but high levels of exposure have tended to lead to below-average future returns in the S&P 500, and vice-versa. Over the past 17 years, when Exposure was negative, the S&P rose at an annualized 13.0%; when Exposure was above 50% (where it is now), that slipped to 4.3%.


VIX

As Bloomberg noted, both the S&P and VIX have gone up together over the past 2 weeks, which could be a short term bearish sign for stocks. The last time this happened was in May 2019, just as stocks pulled back:

If we run the numbers, this has been a slight bearish factor for the S&P over the next week, but it hasn't been terribly or consistently bearish.

This is an abridged version of our recent reports and notes. For immediate access with no obligation, sign up for a 30-day free trial now.

We also looked at:

  • It's been a year and a half since more than 60% of NYSE common stocks were in uptrends
  • Why it's a good sign that the OECD leading indicator is turning up
  • Breadth has been making a lot of new highs this year
  • Applying some sentiment indicators to our buy/sell signals

The post titled Hedge Funds Are Ramping Up Their Exposure was originally published as on SentimenTrader.com on 2019-12-11.

At SentimenTrader.com, our service is not focused on market timing per se, but rather risk management. That may be a distinction without a difference, but it's how we approach the markets. We study signs that suggest it is time to raise or lower market exposure as a function of risk relative to probable reward. It is all about risk-adjusted expectations given existing evidence. Learn more about our service , research, models and indicators.


Follow us on Twitter for up to the minute analysis of market action.


Not ready to signup up for a free trial yet?

Signup for our Daily Lite email to receive highlights of our daily report, research and studies.


Follow us on Twitter:

Find us on Facebook:


Subscribe to our Youtube Channel:


RSS Feed

Subscribe to the Blog RSS feed

Recent Blog Posts


As mentioned in...

Brought to you by:

Sundial Capital Research Logo