Hedge funds are ramping up bets against the shares of smaller companies after a searing rally, as doubts linger about the resilience of the US economy in the face of a global trade war.
“Managers believe that small caps are more exposed to domestic economic uncertainty,” said Jon Caplis, CEO of hedge fund research firm PivotalPath. “The return of inflationary pressures in the US and the likelihood that interest rates will be higher for longer – all of which impact small-cap margins, growth and indebtedness — has led to a more bearish tilt.”