November’s stock-market rally gets a boost from trend-following funds and company share buybacks
The U.S. stock-market rally this month has gotten a big boost from corporations buying back their shares, and computerized trend-following funds adding to their bullish bets, according to data from Bank of America and UBS Group.
According to the latest report on client fund flows from Bank of America, corporate buybacks last week were the second-highest on record dating back to 2010 as a percentage of the S&P 500’s total market capitalization.
Last week also marked the second week in a row that the pace of corporations’ share buybacks was substantially faster than the long-term seasonal trend. Meanwhile, a team from UBS Group told clients that commodity trading advisors, or CTAs, as they’re more widely known on Wall Street, finally jumped back into stocks after sitting on the sidelines for a few weeks.
“CTAs have finally decided to join the party. After sitting on the sideline late October and early November, they bought equities in size in the last 2 weeks,” UBS Group said.
UBS estimates that these funds culled 80% of their short positions over the past two weeks, which translates to between $60 billion and $70 billion in equity buying.
The team expects the buying to continue over the next two weeks, with trend-following funds expected to deploy another $30 billion to $40 billion in exposure, even as the rally in U.S. stocks appeared to stall on Tuesday as the S&P 500 and Nasdaq Composite snapped five-day winning streaks. At this pace, CTAs are expected to once again become “net long” equities by the end of this week.
CTA positioning is sending a strong bullish signal for U.S. stocks, potentially providing another boost to the S&P 500 heading into the final month of 2023. The large-cap index is up 18.2% year to date as of Tuesday’s close, according to FactSet data.
Since the start of November, it has risen 8.2% to finish Tuesday at 4,538, leaving it within 1% of its 2023 closing high.
https://www.marketwatch.com/story/november-stock-market-rally-gets-a-boost-from-computerized-funds-and-companies-buying-back-their-shares-b851437e
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Short Seller Hedge Funds Rack Up $43B Loss In Recent Market Rally
The recent equity market rally, which has launched the S&P 500 on course for its best month since July 2022, squeezed hedge fund short sellers to the tune of $43 billion.
Data collected by S3 Partners showed that hedge fund short-selling losses between Tuesday and Friday last week — following better-than-expected U.S. inflation data — amounted to $43.2 billion. The data did not take into account gains hedge funds might have made from other stock positioning. US Index Gains 9% In November. The S&P 500 is up nearly 9% so far this month, confounding short sellers who — having watched the index drop into correction territory after losing nearly 11% between July 27 and Oct. 27 — speculated losses had further to go. Since its most recent bottom on Oct. 27, the SPDR S&P 500 ETF (NYSE:SPY), an exchange-traded fund that tracks the index, has risen by nearly 11%.
Short positions had been built on companies with large debt piles that have greater exposure to higher interest rates. But in recent weeks, there have been signs the Federal Reserve may begin to loosen its policy stance sooner than markets had previously expected.
https://markets.businessinsider.com/news/etf/short-seller-hedge-funds-rack-up-43b-loss-in-recent-market-rally-1032843734