Hedge funds are positioning themselves for Donald Trump's presidency with record levels of borrowing and bullish bets on the U.S. dollar. The financial institutions are divided on the potential impact of Trump's trade policies on U.S. stocks, with some anticipating benefits while others express concerns about increased volatility.
Hedge funds have ramped up their borrowing to record levels since 2010, anticipating a continued rise in the U.S. dollar under Donald Trump 's presidency. According to bank research and industry data, these financial institutions have positioned themselves for Trump 's trade policies, which are expected to favor some U.S. stocks while potentially deterring gains in others. U.S.
stock trading hedge funds began the week with gross leverage at its highest point since 2010, as observed in a note from Morgan Stanley's prime brokerage. Gross leverage reflects the extent to which a hedge fund has increased its market exposure. European stock traders, on the other hand, are betting on an increase in European equities, particularly in financial, technology, and energy companies. They anticipate that lower taxes, deregulation, and higher tariffs might create favorable conditions for certain U.S. stocks. However, tariffs and increased volatility are likely to hinder broader market gains.Lancaster Investment Management, a London-based hedge fund overseeing approximately $1.4 billion in assets, expressed these views in an investment letter penned by portfolio managers James Hanbury and Jamie Grimston. They acknowledged that while lower taxes, deregulation, and higher tariffs could benefit some U.S. stocks, the potential for these policies to lead to a larger fiscal deficit and increased economic volatility raises concerns. The firm also highlighted their positive outlook on financial firms like Plus500 and IG Group, anticipating that higher volatility and regulatory flexibility would be beneficial for their operations. Meanwhile, hedge funds specializing in macroeconomic signals, including systematic trend followers, continue to predict a strong U.S. dollar. This trend is supported by Goldman Sachs, which reported that hedge funds sold emerging market stocks outside of China in the largest net selling since October, anticipating a shift in global trade dynamics under Trump's presidency.
HEDGE FUNDS TRUMP DOLLAR STOCK MARKET TRADE POLICIES
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