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Portfolio > Asset Managers

Before Election, Macro Managers Stayed Bearish for November

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NASHVILLE, Tenn. (–Hedge fund managers in the macro segment maintained a gloomy outlook for U.S. economic performance in three key categories for November, according to the VAN Macro Sentiment Indicators, a monthly survey conducted by Van Hedge Fund Advisors.

One of the factors affecting their view–concern over the U.S. presidential election–was muted Wednesday with the relatively fast resolution of the contest’s outcome, in which President George W. Bush was re-elected.

The bearish view was a continuation of rather pessimistic sentiments for the survey’s indicator categories–the Standard & Poor’s 500 stock index, the U.S. dollar and the U.S. Treasury 10-year Note–but a modest uplift from their October forecast, in which the managers were majority bearish in all three categories, the first such result since Van began taking the survey in March.

In their outlook for U.S. equities in November, 42% of managers were bearish, down from 56% for October, while 25% were neutral and 33% were bullish. They were 63% bearish on the dollar, up from 57%, and 46% bearish/33% bullish on the U.S. Treasury 10-year Notes, a bit of an improvement from October, when 52% were bearish on the Treasury notes and 26% were bullish.

Results are based on the responses of a group of 25 to 30 mostly traditional macro fund managers–with some long/short equity managers using a macro overlay strategy–with a combined total of about US$33 billion in assets under management, according to John Van, chief financial officer for the company. The survey was taken during the last week of October.

The major factors shaping the managers’ outlook, Mr. Van noted, were the same as those in the preceding month: concerns about the outcome or aftermath of the U.S. presidential elections, worry about terrorism and the war in Iraq and rising oil prices and doubts about future supply.

“Now we’ve seen one of those concerns knocked out of the way,” said Mr. Van, speaking just after the Democratic presidential contender, Sen. John Kerry (D-Mass.) had conceded the election to Mr. Bush. Noting that the markets’ greatest fear might have been a drawn-out contest over the outcome, rather than the effect of who actually won, Mr. Van said, “I think either way it went we would have gotten a pop out of the market, because so much cash was sitting on the sidelines, waiting.”

The Dow Jones Industrial Average was up 125 points for the day in midafternoon trading after Mr. Kerry’s concession.

Mr. Van said some traders were ready with some so-called presidential plays (such as long positions on pharmaceuticals for a Bush victory, short if Mr. Kerry had won) and that some managers will trade opportunistically based on the election results.

And while Mr. Van said the managers “apparently called the S&P wrong, because it seems to be on fire right now,” he said that they base their fundamental trading approach on a long-term outlook and that factors such as the Iraq war and the price of oil continue to cloud the horizon–although crude oil futures prices have retreated in recent days.

“We still see huge questions about the future of oil in terms of demand and production,” Mr. Van said.

Contact Bob Keane with questions or comments at: [email protected].


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