8/17/2014
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Does George Soros know something we don’t about the S&P 500?
- Reuters
- Bucket of expensive bolts
Oh, goody. It’s 13F time, when mere mortals like us get to see how the big boys rolled the dice in the last quarter.
Among the highlights, Soros Fund Management increased a bear-call bet on the S&P 500 in a huge way. The fund lifted a put position — a bet the market will go lower — on the S&P 500 ETF SPY to its biggest size yet, in terms of value and portfolio percentage, making a 605% leap over the previous quarter.
Bullion Baron, who has long kept a beady eye on Soros’s SPY moves, has summed up the latest dealings. He speculated that this could be a hedge — or Soros is really worried about something. One possible something is China, which the hedge-fund titan referred to as a global uncertainty earlier in the year, notes the Baron.
Soros also lifted positions in Apple and Facebook and a portfolio loaded up with stocks, so he can’t possibly be all that gloomy. As for that China unease, WSJ’s MoneyBeat reports that China bears are entrenched and see stocks headed for a big fall. One strategist says it’s not good to see that stocks there have been rallying on both good and bad economic news.
“In [a] market frenzy, it is difficult to keep a cool head. But if things don’t add up, it will eventually fall apart,” Hao Hong, Bank of Communications international strategist, tells MoneyBeat.
Now the only problem here, says the Baron, is that if things go pear-shaped in China, that’s not great news for equity markets anywhere, especially those at overvalued levels. Just a reminder, the 13Fs are from the second quarter so for all we know Soros has changed his mind completely since then.
In the short term though, it seems global managers are willing to place their bets on Wall Street. What IG’s Chris Weston hears among some institutional funds, he says, is that with Europe pinned down by Russian worries and growth problems, most think U.S. stocks are a pretty good bet, at least for the short term – three to six months.
“From a relative-growth perspective, the U.S. is significantly outperforming Europe, corporate earnings have been good. From a geopolitical standpoint … where do you go to invest right now, with bond yields so low? The belief is that the U.S., on a relative basis, is going to outperform,” says Weston.
He says if you’d asked him three months ago what his biggest worry was, he would have said a 10% drop for the S&P 500, due to a major rise in 10-year bond yields. ”That’s clearly not going to happen anytime soon,” he says.
Recent data from Bank of America Merrill Lynch data shows fund money poured out of Europe in this week, into Japan and China, with modest flows into the U.S.
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