GREENWICH, Conn. (HedgeWorld.com)–Hedge fund managers reversed their bearish view of the U.S. dollar this month, with 61% of those responding to a Van Hedge Fund Advisors survey predicting a January rally for the currency.
With a number of economic analysts having forecast relatively strong 2005 performance for the U.S. economy against lackluster expectations for Europe, the hedge fund managers brightened their outlook for the dollar after taking a majority bearish view for all of the fourth quarter of 2004.
In the same VAN Macro Sentiment Indicators survey, responding fund managers also took a bullish position on U.S. equities for this month, with 57% of them looking for the Standard & Poor’s 500 stock index continue its upward movement in January.
For the second month in a row, the managers had a bearish view of U.S. Treasury 10-Year Notes, with 61% of them expecting to see Treasuries move lower. In December, 80% of them were bearish on the Note, whereas in November an overall slight majority was either neutral (21%) or bullish (33%).
Just 26% of managers were bearish on U.S. equities for January, while 17% were neutral. The rest were bullish.
John Van, chief financial officer for Van Hedge Fund Advisors, noted that the sentiment indicators provide a glimpse of managers’ outlook at the beginning of the month and could reflect short-term views. The survey totals responses monthly from 20 to 30 managers who oversee approximately US$30 billion in assets.
“Depending on the strategy, these [results] could be very short-term positions or they could be core positions,” he said. Mr. Van also observed that a recent decline in oil prices and a release of pent-up cash following the U.S. presidential elections have contributed to a growing bullish sentiment since November, when just 33% percent of the surveyed managers started out the month with a favorable view of stocks.
Still, he pointed out that considerable uncertainty is still the rule, with market watchers fretting over the war in Iraq and the U.S. unbalanced trade account, among other issues.
“I’ve seen one manager, who’s bearish, predict a recession,” Mr. Van said. “And he said if we do have one the U.S. government doesn’t have any arrows left in its quiver.”
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