WITH the S&P 500 about to end its best month in almost 40 years, many would be happy to cash in gains and start packing for the ski slopes.
But some underperforming investors are being cornered into putting yet more money into US stocks.
The S&P 500 on Friday closed its fourth week of gains and is up more than 13 per cent in October alone. But many, including hedge funds, were caught wrong-footed by the rally.
Even though some pullback may be expected this week, the clearer picture after the European deal “should give a green light for many of the funds to get back in risk assets”, according to Robert Francello, head trader at hedge fund Apex Capital, which manages about $2bn in San Francisco.
“Hopefully we'll be able to see some further gains into the year end,” he said.
Hedge funds, among the equity market’s power players, are on average sitting on losses of 8 per cent for the year according to Hedge Fund Research. Meanwhile, the S&P 500 is up for the year, if only a bit more than 2 per cent.
A JPMorgan note to clients following Thursday’s 3 per cent rally on the US benchmark index argues for a “strong foundation for an equity rally into year end”, with a 1,400-1,475 target. That’s more than the 8 per cent gain hedge funds would need to come out of the red for the year.
More than 100 S&P 500 companies will report earnings this week, with Lowes, Pfizer and Kellogg among the highlights. Among the more than 300 that have already posted earnings for the past quarter, roughly seven out of 10 have reported better numbers than analysts expected.