Expansion in U.S. housing, recovering markets in Europe and buying by individuals will push the advance in equities to its fourth and final stage, “acceptance,” Birinyi said in a telephone interview on Dec. 20. The president of Westport, Connecticut-based Birinyi Associates Inc. recommended investors buy stocks in March 2009 as the S&P 500 bottomed.
Hedge funds, largely unregulated pools of capital that can bet on falling as well as rising asset prices, are closing bets against the U.S. economy after four years of giving their clients subpar returns.
The Bloomberg Global Aggregate Hedge Fund Index, which tracks average performance in the $2.19 trillion industry, increased 1.1 percent last year. An investor who bought the Vanguard 500 Index Fund tracking the S&P 500 would have matched the index’s 13 percent return while paying fees of 0.1 percent. Hedge funds usually charge 2 percent of assets and keep 20 percent of any appreciation.
“They cannot afford to have another poor year,” said Peter Rup, the chief investment officer at New York-based Artemis Wealth Advisors LLC, which invests in hedge funds. His firm manages $600 million.
A gauge of hedge-fund bullishness, which measures how much they’re betting on rising shares, rose to 47.3 at the end of 2012 from 43.9 a year ago and is near the one-year high of 48.1 in August, according to a survey by International Strategy & Investment Group. A reading below 50 still suggests a bias toward short bets.
U.S. Steel, the country’s largest producer by volume, rose near to an eight-month high last week, helped by third-quarter earnings released in October that beat analysts’ estimates. Shares shorted in the Pittsburgh-based company reached a record of 40.6 million in June, 28 percent of the total outstanding, exchange data collected by Bloomberg show.
J.C. Penney of Plano, Texas, faces bearish bets on 29 percent of its stock. The shares fell to a more than three-year low Nov. 16 before rebounding 27 percent even as the retailer reported a third-quarter loss greater than analysts estimated. Moody’s Investors Service lowered its junk-grade credit rating three levels on Nov. 20.
“The Fed has been incredibly proactive in fighting the crisis, and has not only improved many of the economic data points but also increased consumer confidence and investors’ appetite to take on risk,” Henk Potts, who helps oversee $282 billion as an equity strategist at Barclays Plc in London, said in a phone interview on Jan. 4. “Equities will be an outstanding class in 2012 and it is understandable that investors are scaling back their short bets.”