JP Morgan’s analysts say that hedge funds turning unexpectedly cautious in October could set the stage for a rebound in equity markets into year-end, according to a report by Investing.com.
In a note, the bank observed that funds running equity long/short strategies reduced their exposure to equities in October to the lowest level in over a year. Equity quant funds also displayed a relatively low equity beta during the month.
The cautious stance could work as an upside risk for markets, the analysts argue, as lower exposure today leaves room for increased allocation if sentiment improves.
