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A recent article in Seeking Alpha focused on the traditional role of some of Wall Street’s biggest players: hedge funds.
In the six-year bull market that has taken the S&P 500 to new all-time highs, there has been little need for hedging or protection from a weak stock market. However, a large part of what hedge funds are meant to do is protect investors from market risk via selectively short-selling stocks.
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Underperformance
According to Goldman Sachs, hedge funds have now underperformed the S&P 500 for six consecutive years.One contributing factor to the underperformance has likely been the short positions that the funds have held during that time. Although there have certainly been some big losers in the past six years, shorting stocks has largely been a losing game.
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Poor Environment For Shorting
The Federal Reserve’s quantitative easing policies and historically low interest rates have provided major support for the stock market in recent years, but short sellers have been fighting an uphill battle against the Fed.Many stocks may be losing Fed support soon, as the first interest rate hike is widely expected to come within the next year.
Top Shorts
Goldman’s "Hedge Fund Trend Monitor" includes a list of the most commonly shorted stocks among Goldman’s hedge fund clients. When the bull market finally comes to an end, hedge funds will be looking for the falling share prices of these stocks to serve as hedges against losses from the funds’ long positions.Here are the 10 most shorted stocks by hedge funds:
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.