Hedge funds’ bearish bets against the Standard & Poor’s 500 Index increased to the highest level since 2008 after this month’s stock slump raised concern that economic growth is slowing, Societe Generale SA analysts said.
The funds and other traders hold a net 71,000 futures contracts wagering that the S&P 500 will decrease in value, Societe Generale analysts led by Alain Bokobza wrote in a note to clients Wednesday. The short position is the highest since 2008, when Lehman Brothers Holdings Inc.’s bankruptcy triggered a global credit crisis, the analysts said.
The S&P 500 has fallen 10 percent this month as a government report tracking manufacturing posted its weakest reading since 2009 and analysts at Morgan Stanley said the U.S. is “dangerously close to recession.” The decline has led to speculation that the U.S. Federal Reserve may announce plans this week at its annual meeting in Jackson Hole, Wyoming, to stimulate the world’s biggest economy.
“The bears are very loud at the moment, and very vulnerable if the news flow were to improve,” Bokobza, head of asset allocation strategy at the Paris-based bank, said in an interview today. “That would force hedge funds to close out their shorts.”
Societe Generale’s analysis is based on traders’ futures positions as of Aug. 16. The information was collected and disclosed by the U.S. Commodity Futures Trading Commission on Aug. 19. A futures contract allows an investor to sell or buy an asset at a specific price and time.
Futures contracts for companies traded on the Nasdaq Stock Market show investors are betting that technology companies will rise in value, according to Societe Generale. Hedge funds haven’t had a net bearish view on Nasdaq firms since last October, the bank’s analysts said in their report.
Hedge funds, which are private investment pools that aim to make money whether market rise or fall, continue to wager that gold will rise in value, according to Societe Generale’s report. Futures for December delivery have risen 29 percent this year to $1,843.90 per ounce in New York trading. Investors typically view the precious metal as a safe haven when other assets are decreasing in value.
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