Hedge fund says US hard landing and sell-off frenzy is ahead
The rally in equities is set to grind to a halt as investors come to grips with slowing US growth, and seasonal factors are likely to compound the selling pressure, according to Vantage Point Asset Management.
Tighter lending standards and fledgling signs of slack in the labor market suggest that the US economy is headed for a hard landing, said Nicholas Ferres, chief investment officer of the global macro fund. In July, the money manager took net long exposure for his firm’s main fund to 10% — “virtually flat,” in his words.
“It’s more likely toward September, October rather than August but it could be underway now,” Ferres said, referring to when seasonal factors are likely to exert pressure. “People will be panicking and selling — that’s the opportunity for us to scale up.”
Traders are grappling with the rising prospect of a correction in equities after a rally catapulted the S&P 500 Index to within 7% of an all-time high. Ferres’ forecast jives with the views of JPMorgan Chase & Co.’s Marko Kolanovic who’s urging investors to stay underweight on stocks on expectations that the global economy is likely to slip into a recession.
Ferres was a portfolio manager at Eastspring Investments and Goldman Sachs’ asset management arm prior to Vantage, which has around $800 million in assets under management.
He expects the effects of monetary tightening to exacerbate the impact of seasonal factors, with August and September historically registering as the worst months for US stocks.
Vantage Point is priming for a pullback in risk markets that will open the door for it to build holdings in hard-hit assets, including Chinese equities, said Ferres. He also plans to replicate a formerly winning trade — buying up large technology
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