Hedge funds have become too pessimistic about stocks as they position for a slump in global equities and may have to become more bullish if the current stock rally continues pushing the market even higher according a report by Bloomberg.
The report cites Arthur van Slooten, a strategist at Societe Generale, as saying that their positioning is “so extreme” that no decline in equities “could result in a quick and drastic reversal of positions” and could potentially send “equities and bond yields higher”.
According to data compiled by Bloomberg, the report says that net short positioning on the S&P 500 stands near levels seen only during the global financial crisis, despite the MSCI All-Country World index currently holding on to the vast majority of gains made during March and April.
