{"id":60870,"date":"2017-02-22T00:13:00","date_gmt":"2017-02-21T23:13:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/news\/risk-assets-on-the-rise-and-supportive-alpha-a-nice-cocktail-for-hedge-funds\/"},"modified":"2019-12-31T01:45:43","modified_gmt":"2019-12-31T00:45:43","slug":"risk-assets-on-the-rise-and-supportive-alpha-a-nice-cocktail-for-hedge-funds","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/news\/risk-assets-on-the-rise-and-supportive-alpha-a-nice-cocktail-for-hedge-funds\/","title":{"rendered":"Risk Assets on the Rise and Supportive Alpha: a Nice Cocktail for Hedge Funds"},"content":{"rendered":"<p>Markets have gone back and forth while assessing the prospects for Trump\u2019s economic plans<br \/>\nand the timing of U.S. rate hikes. Last week, risk assets in DM and EM progressed, stirred by<br \/>\nsupportive data and Trump\u2019s plans to unveil a \u201cphenomenal\u201d tax policy. Most hedge funds<br \/>\nheaded north. CTAs thrived on their long equities. Macro funds\u2019 dollar crosses were also<br \/>\nrewarded. Special Situation funds benefited from the increasing prospect of corporate activity.<\/p>\n<p>Additionally, L\/S Equity funds continued to make steady progress. We took a close look at the<br \/>\nearnings reports this season, usually a reliable barometer of the alpha environment. It is well<br \/>\nunderway in the US, where 80% of the S&#038;P 500 companies reported earnings and revenues<br \/>\nwhich were up +5.5% and +4.7% y\/y, respectively (sce: Bloomberg).<br \/>\n<quote>This confirms an on-going<br \/>\nprofit recovery with, unlike other recent earnings seasons, decent top-line growth.<\/quote><\/p>\n<p>These encouraging trends weren&#8217;t unexpected: earnings surprises were in line with historical<br \/>\naverages, while revenue surprises and EPS beats underwhelmed. As a result, stock prices<br \/>\nprogressed before reports, but slightly receded afterward. Moderate trading volumes<br \/>\nemphasized investors&#8217; wait-and-see stance amid high policy uncertainty. However, the decline<br \/>\nin stock volatility after earnings announcements reflected persisting optimism. The dispersion in<br \/>\nsurprises was mild, except in the consumer discretionary, staples and energy sectors.<\/p>\n<p><quote>While these patterns suggest a limited potential for stock picking, this season actually made<br \/>\nstrong room for fundamental pricing. The momentum in individual stock prices was closely in<br \/>\nline with that in their earnings and revenues.<\/quote><br \/>\n Further, in contrast with the Q3 season, which saw<br \/>\nreturns mainly driven by sector moves (after the U.S. elections), this season returns were<br \/>\nlargely idiosyncratic.<\/p>\n<p><strong>It is true that modest stock dispersion and the gyrations in politics cap the potential for value<br \/>\nextraction. However, low stock correlation, the dominance of fundamental pricing, and multiple<br \/>\ncorporate catalysts are providing strong tailwinds benefitting stock pickers. We continue to favor<br \/>\nthe fundamental approaches in the US &#8211; including neutral equity and event driven funds.<\/strong><\/p>\n<p><a href=\"http:\/\/www.next-finance.net\/http:\/\/beta.next-finance.net\/wp-content\/uploads\/2017\/02\/correlation_across_us_equities_fell_drastically_post_u.s._elections_a_tailwind_for_stock_pickers.jpg\"><img loading=\"lazy\" class=\" aligncenter size-full wp-image-60837\" src=\"IMG\/jpg\/correlation_across_us_equities_fell_drastically_post_u.s._elections_a_tailwind_for_stock_pickers.jpg\" alt=\"correlation_across_us_equities_fell_drastically_post_u.s._elections_a_tailwind_for_stock_pickers.jpg\" align=\"center\" width=\"895\" height=\"317\" \/><\/a><div id='gallery-1' class='gallery galleryid-60870 gallery-columns-3 gallery-size-herald-lay-c1'><figure class='gallery-item'>\n\t\t\t<div class='gallery-icon landscape'>\n\t\t\t\t<a class=\"herald-popup\" href='http:\/\/beta.next-finance.net\/wp-content\/uploads\/2017\/02\/correlation_across_us_equities_fell_drastically_post_u.s._elections_a_tailwind_for_stock_pickers.jpg'><img width=\"470\" height=\"313\" src=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2017\/02\/correlation_across_us_equities_fell_drastically_post_u.s._elections_a_tailwind_for_stock_pickers-470x313.jpg\" class=\"attachment-herald-lay-c1 size-herald-lay-c1\" alt=\"\" loading=\"lazy\" srcset=\"http:\/\/beta.next-finance.net\/wp-content\/uploads\/2017\/02\/correlation_across_us_equities_fell_drastically_post_u.s._elections_a_tailwind_for_stock_pickers-470x313.jpg 470w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2017\/02\/correlation_across_us_equities_fell_drastically_post_u.s._elections_a_tailwind_for_stock_pickers-300x200.jpg 300w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2017\/02\/correlation_across_us_equities_fell_drastically_post_u.s._elections_a_tailwind_for_stock_pickers-414x276.jpg 414w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2017\/02\/correlation_across_us_equities_fell_drastically_post_u.s._elections_a_tailwind_for_stock_pickers-130x86.jpg 130w, http:\/\/beta.next-finance.net\/wp-content\/uploads\/2017\/02\/correlation_across_us_equities_fell_drastically_post_u.s._elections_a_tailwind_for_stock_pickers-187x124.jpg 187w\" sizes=\"(max-width: 470px) 100vw, 470px\" \/><\/a>\n\t\t\t<\/div><\/figure>\n\t\t<\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>Markets have gone back and forth while assessing the prospects for Trump\u2019s economic plans and the timing of U.S. rate hikes. Last week, risk assets in DM and EM progressed, stirred by supportive data and Trump\u2019s plans to unveil a \u201cphenomenal\u201d tax policy. Most hedge funds headed north. <\/p>\n","protected":false},"author":1,"featured_media":60837,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1470],"tags":[1687,1743,1655,1723,1690,1651,2214,1662,2243,2068,1672],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/60870"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=60870"}],"version-history":[{"count":1,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/60870\/revisions"}],"predecessor-version":[{"id":60871,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/60870\/revisions\/60871"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/60837"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=60870"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=60870"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=60870"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}