Some hedge-fund books tracked by prime brokers capture weaker risk appetite. Clients on Morgan Stanley’s platform have reduced net leverage to 49 percent, down from a peak of 60 percent in March.
And JPMorgan points to another source of comfort when tracking the quantitative cohort: Trend-followers’ equity exposures are relatively muted at around two-thirds of their January peak. Meanwhile, the mom and pop crowd are playing defense.
“August and September to-date have seen modest outflows from equity funds and inflows into bond funds, suggesting that retail investors retain a rather cautious stance,” the strategists wrote.
Still, with short interest on American stocks on the decline while volatility traders bank on subdued price swings, signs of U.S. equity-market "vulnerability” are building, JPMorgan concludes.
This article was provided by Bloomberg News.