Survey: Sentiment for US Stocks Among HF Managers Grows Bearish

(August 31, 2010) — A survey by TrimTabs Investment Research and BarclayHedge reveals that nearly half of hedge fund managers have become bearish about stocks.

“Bearish sentiment skipped sharply higher, and bullish sentiment plunged,” Sol Waksman, CEO of BarclayHedge, said in a release outlining the study, which consisted of research compiled from interviews with 104 hedge fund managers over the past week. “Meanwhile, short interest is heaviest in the most cyclical sectors, and from a seasonality standpoint September is far and away the worst month of the year for stocks. The developments hedge fund managers are telegraphing bode ill for equities.” Over the past two months, bullish sentiment has increased to 36% from 14%, as hedge fund managers continue to favor US Treasury bonds.

About 47% of the managers interviewed said they were not optimistic about returns of the Standard & Poor’s 500 Index, compared to 33.1% a month earlier. Meanwhile, the number of hedge fund portfolio managers who were bullish on the S&P 500 dropped in August to 17% from 34%.

Additionally, the study revealed hedge fund managers were increasingly optimistic about the strength of of the US dollar in August — 29% categorized themselves as bullish, compared with 22% in July.

In regards to fiscal and monetary policy, almost 63% of managers surveyed this month said they want to see the Bush tax cuts extended in some form. According to TrimTabs and BarclayHedge, half of managers believe decreased deficit spending is justified, while 18% feel the government should spend more.