Hedge Funds Hit Hard by Market Downturn

Hedge funds endured a difficult week last week, according to a report by Morgan Stanley. This pain stemmed from a combination of factors:

• Falling Markets: Major U.S. indices, including the S&P 500, Nasdaq, and Dow Jones, all experienced declines.
• Disappointing Earnings Reports: Tech giants like Dell Technologies and Salesforce fell short of expectations, impacting the broader market.
• Slower Economic Growth: Economic data indicated a weaker-than-anticipated economic growth in Q1.

Hedge Fund Struggles:

• Long Bets Backfire: Hedge funds, which typically hold long positions (bets that a stock will rise), suffered losses as the overall market dipped.
• Selling Spree: Morgan Stanley, a leading prime broker, observed hedge funds net selling equities across all regions, particularly in North America's tech, media, and telecom sectors. This selling included prominent large-cap stocks.
• Short Selling Uptick: In addition to reducing long positions, hedge funds also increased short bets (wagers that a stock's price will fall) across various markets.

Performance Lag:

• Weekly Performance: Compared to the S&P 500's 1.3% decline, Americas-based long/short funds suffered a steeper drop of 0.9%.
• Monthly Performance: Over the month, these hedge funds only captured 35% of the S&P 500's gains, highlighting their underperformance.

In essence, the confluence of a bearish market, disappointing corporate earnings, and concerns about slowing economic growth led to significant losses for hedge funds, particularly those heavily invested in long positions and technology stocks.

Industry PE Ratio as a Valuation Tool

For investors interested in comparing Intel's valuation relative to its industry peers, the Financial Modeling Prep (FMP) Industry PE Ratio API https://site.financialmodelingprep.com/developer/docs/industries-pe-ratio-api

provides a valuable resource. This API offers daily updated industry PE ratios, allowing you to assess whether the technology sector, where Intel operates, is currently overvalued or undervalued. By leveraging this API and similar valuation tools, investors can make more informed decisions about their technology holdings.