Fund Managers Add Tail Risk Hedges At Fastest Pace In 14 Months

As stocks advance to new record highs amid an ongoing, two-day sigh of relief tied to the fact that the world didn’t end over the weekend, it’s worth noting that there are signs of investor caution despite what the benchmarks are screaming at you.

Take a look at BofAML’s latest fund manager survey, for instance.

According to the September 1 poll, there was a 9 percentage point rise in the share of money managers buying hedges on their equity books from last month:


That’s the biggest jump in more than a year.

You’ll never guess what’s got everyone so spooked…


Turns out, people care about the threat of nuclear war after all, even if they’re willing to keep buying the dips while they’re simultaneously adding tail hedges.

Meanwhile, Markit is out flagging another sign of investor angst. “While the market was taking a deeper than usual summer slumber, short sellers added to their positions in US blue chip stocks,” Simon Colvin writes, in a note dated Tuesday, adding that “this steady buildup of short positions over the last few months means that the average borrow activity across S&P 500 constituents now stands at 2.7% of shares outstanding – a level not seen since last November’s presidential election”:


“The recent surge in shorting activity over the last few weeks hints of a lull before the storm,” Colvin goes on to caution.

Maybe, but we just we made it through two literal storms (Harvey and Irma) and two figurative storms (debt ceiling and North Korea’s founding day) and here we are at all-time highs.

Plus, Apple is about to unveil the new iPhone, so you know, what could go wrong?


Speak On It