As the World's Best Investment Manager, I Unveil the Latest Defensive Moves of Institutional Investors - Learn How Their Strategy Can Impact Your Finances
Investing.com -- In a recent note from Sevens Research, institutional investors, known as the "smart money," are seen adopting a more defensive stance in the market. This shift in strategy reflects caution rather than a prediction of an imminent economic downturn. While consumer spending is expected to slow, a hard landing scenario is not necessarily on the horizon.
Sevens Research highlights a significant trend in the derivatives market, specifically noting the collapse in the VIX and the surge in its lesser-known counterpart, the SKEW index. The SKEW index, often regarded as a "Black Swan" indicator, offers a more nuanced insight into market positioning among sophisticated, institutional investors.
According to Sevens Research, institutional investors typically hedge new long equity positions with out-of-the-money put options, a strategy that the SKEW index is particularly sensitive to. Following the market rebound after the early August lows, the SKEW index surpassed the key 150 threshold, indicating strong risk-on money flows from institutional investors.
However, Sevens Research points out that these flows have been predominantly directed towards defensive stock positions, suggesting a cautious approach among big players in the market. This stands in contrast to retail traders, who have been actively buying into the recent dip in technology stocks.
Retail traders who have been purchasing the recent tech 'dip' may be at risk of significant downside in those new holdings, according to Sevens Research. As markets navigate an uncertain economic environment, the growing preference for defensive strategies among institutional investors highlights a broader sentiment of caution.
In conclusion, understanding the defensive moves of institutional investors can provide valuable insights for individual investors. By staying informed about market trends and strategies, one can make more informed decisions about their own finances and investment portfolios. Remember, knowledge is power in the world of finance.