Business Maverick: Money Managers Bracing for Upheaval With Stocks Near Record

Any number of looming threats could bring the historic rally in U.S. equities to a screeching halt, top hedge fund and mutual fund managers said. They include uncertainty over school re-openings, the November elections, tensions with China and the effect of monetary policy on inflation.While the S&P 500 has surged more than 50% from its March low, that happened with unemployment in double digits and the federal government struggling to contain Covid-19.

To be sure, dour predictions have been piling up for months. On May 12, during a webcast held by the Economic Club of New York, Stan Druckenmiller said the risk-reward calculation for equities was the worst he’d seen in his career. The S&P 500 has climbed 18% since then, and Druckenmiller later said he was “far too cautious.”And while many investors are vocal in their skepticism, their views don’t perfectly accord with the behavior of professional managers as a whole.

Then there’s the race for a vaccine. It’s possible that a reliable one could take longer to develop than hoped, or that parts of the population will resist taking it, said Roger Aliaga-Diaz, chief economist for the Americas at Vanguard Group.The market expects it to arrive by the end of the year, “but production and distribution could come much later than people think,” he said. “That would be a negative surprise.”Strong returns for a handful of mega-cap stocks, including Apple Inc.

The WeChat broadside was “the biggest attack on a China technology company since Huawei” and could spur retaliation against Apple or Tesla Inc., Graticule Asset Management, a $2.6 billion macro hedge fund, said in a letter to investors this month.“There is a long-term risk that we’ll see a bifurcation of the global technology industry,” said Russ Koesterich, a portfolio manager and member of BlackRock Inc.’s Global Allocation team.

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