Watch What Hedge Funds Do, Not What Retail Says

Authored by Simon White, Bloomberg macro strategist,

A strong signal of stock-market downside risk is when hedge funds are going short yet retail money is still pouring in. That’s the case today.

Smart money or dumb money? Nobody wants to be the latter, though that’s the pejorative term given by financial markets to retail investors. Smart money is typically taken to be institutional investors and hedge funds. But it’s not as simple as those reductive labels would imply.