Hedge fund says US hard landing and sell-off frenzy ahead

Hedge fund says US hard landing and sell-off frenzy ahead
Vantage Point Asset Management says people will be panicking.
AUG 16, 2023
By  Bloomberg

The rally in equities is set to grind to a halt as investors come to grips with slowing U.S. growth, and seasonal factors are likely to compound the selling pressure, according to Vantage Point Asset Management.

Tighter lending standards and fledgling signs of slack in the labor market suggest that the U.S. economy is headed for a hard landing, said Nicholas Ferres, chief investment officer of the global macro fund. In July, the money manager took net long exposure for his firm’s main fund to 10% — “virtually flat,” in his words.

“It’s more likely toward September, October rather than August but it could be underway now,” Ferres said, referring to when seasonal factors are likely to exert pressure. “People will be panicking and selling — that’s the opportunity for us to scale up.”

Traders are grappling with the rising prospect of a correction in equities after a rally catapulted the S&P 500 Index to within 7% of an all-time high. Ferres’ forecast jives with the views of JPMorgan Chase & Co.’s Marko Kolanovic, who’s urging investors to stay underweight on stocks on expectations that the global economy is likely to slip into a recession.

Ferres was a portfolio manager at Eastspring Investments and Goldman Sachs’ asset management arm prior to Vantage, which has around $800 million in assets under management.

He expects the effects of monetary tightening to exacerbate the impact of seasonal factors, with August and September historically registering as the worst months for U.S. stocks.

Vantage Point is priming for a pullback in risk markets that will open the door for it to build holdings in hard-hit assets, including Chinese equities, said Ferres. He also plans to replicate a formerly winning trade — buying up large technology firms such as Baidu Inc and JD.com Inc — while avoiding property developers.

In the credit market, the fund managers favors the iShares USD Asia High Yield Bond Index ETF.

Kristina Hooper, chief global market strategist for Invesco, is similarly skeptical of the soft-landing scenario and is preparing for a drawdown in risk assets.

“In terms of equities, I think that we could see some headwinds in the US and other developed markets in the near term,” she said in an interview with Bloomberg Television last week. “There’s no way the Fed can do the level of tightening it has done so aggressively and not have some damage — that’s why I think it will be a bumpy landing.” 

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.