Hedge Funds Turning Bullish

Survey: Hedge Funds Turn Bullish on Prospects for 2010

While some Americans are still in doubt over whether the worst of the recession is really over or whether we are headed for a "double-dip," hedge fund managers are optimistic on the U.S. economy, according to a recent survey.  7 out of 10 surveyed managers said they expect corporate earnings to increase at least 10% over the next year.  The number of managers who predict that their firms would have above-trend growth and below-trend inflation rose from 21% to 32%.

More than seven in 10 managers think that corporate earnings will rise 10% or more over the next year, and the number of managers expecting both above-trend growth and below-trend inflation soared from 21% in March to 32% this month, according to the Bank of America Merrill Lynch Survey of Fund Managers. Indeed, fully 42% of respondents say there will be no Federal Reserve interest rate hikes this year at all, up from 38%.

“April’s survey shows a growing number of investors envisaging a Goldilocks scenario of above-trend growth and benign inflation,” Michael Hartnett, chief global equities strategist, said. “The findings are consistent with the view that the U.S. consumer, far from remaining in intensive care, is on the path back to good health.”

And so hedge funds are piling back into stocks, with 52% overweight equities, up from 33% in February. And average cash holdings have fallen, as well, from 3.8% last month to 3.5% this month.  Source

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