Money managers under the microscope
Another sign this year’s huge equity market rally may soon run out of steam.
After Crispin Odey’s warning last month of a pullback — yet to emerge but certainly a possibility according to many hedge fund managers — Majedie Asset Management’s Matthew Smith has sold out of cyclical stocks in case economic growth disappoints.
“If you’re buying cyclicals now you have to take much more of a view on earnings 12 to 24 months out,” he told me.
“If the economic doesn’t recover in line with what everyone expects, some cyclical stocks could be absolutely hammered… Now’s not a good time to put on a lot of risk.”
Stocks may have enjoyed a huge rebound this year (the S&P 500 is up 50 pct from its March low), but the rally is based on speculation, according to one hedge fund firm.
Plenty of fund managers have been predicting a rally in stock markets after the sharp drops seen last year and early this year, but most have expected it to be no more than a bear market rally.
However Crispin Odey, one of the UK’s best known hedge fund managers with a pay packet to match, has stuck his head above the parapet and said he thinks the recent rebound in stock markets could be the start of the next bull market.
It is hardly uncommon in today’s markets to see an investment fall in value.