Watch Out Investors, Check Out What The "Smart Money" Just Started To Do

John Paulson

Individual investors are now (almost) uniformly bullish on equities.

“Buy the dip” has been a killer strategy for months and months now, and we’re once again in that mentality where nobody sees any risks, and nobody wants to settle for the skimpy returns offered by Treasuries.

But watch out.

According to Bank of America/Merrill Lynch’s latest look at hedge fund positioning, the smart money is starting to turn on this market. For the first time since October, Long/Short funds have reduced their net long exposure (currently at 25%), As MarketFolly notes, the last time they retrenched, there was a subsequent market selloff.

Market neutral hedge funds are currently about 5% net short.

Long/Short funds are currently 25% net long, which represents a pullback.

Generally hedge funds favour growth stocks right now

And they favour large caps

In terms of specific indices, funds are short NASDAQ futures

Hedge funds LOVE soft commodities. Everyone is bullish on soybeans, for example.

And they're really bullish on corn.

And they're still long gold... but it's way off highs of last year.

They're also very long energy

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