Markets have brushed off the largest drop in U.S. industrial production in nearly a year and a half in recent sessions, a dreary fourth-quarter economic outlook from Atlanta’s Federal Reserve Bank, underwhelming data from Europe as well as Asia, and records that the U.S. and China are unlikely to achieve a trade deal before the end of this year.
Mr. Haidar’s New York-based hedge fund betted a few months ago that a deteriorating U.S. economy as well as the U.S.- China trade war would weigh on stocks and send investors into relatively safe assets such as U.S. government bonds.
In the last couple of weeks, Mr. Haidar has reduced bets on stocks or short positions and cut positions in U.S. government bonds.
The resilience of stocks was an unexpected development for investors who feared the kind of tumult that ended in 2018. In a recent survey by Bank of America Merrill Lynch, economic growth forecasts among fund managers scored their largest record-breaking rise.
Optimism has helped fuel highfliers ‘ blowout results, such as technology stocks, preparing for their best year in a decade. Tesla Inc.’s shares have risen since the electric vehicle manufacturer made a surprise profit at the end of October, while those of the beaten-down giant General Electric Co. are close to their highest level of the year.
Fears, on the other hand, that the Federal Reserve and other central banks tightened monetary policy in the face of sluggish global growth at the end of 2018 sparked a sharp selloff.
Mr. Draho puts the U.S.- China deal’s chances at about 60%. This month, UBS Global Wealth Management increased its allocation to industrial shares, which appear to do better when the economy recovers, while growing investments in the more conservative consumer staples market.
Mr. Stanton owns tech stocks such as Amazon.com Inc. as well as Facebook Inc., expecting them to make up their lost ground in a rocky period earlier this year.
Mr. Haidar, of Haidar Capital Management, points out that prices for industrial metals such as iron ore as well as other commodities linked to global manufacturing have shrunk despite recent equity optimism.