Finance

Hedge funds performed better under Democratic presidents than Republican ones, history shows

Published

2 days ago

November 12, 2024

Business Finance News

Traders work on the floor of the New York Stock Exchange.

NYSE

There’s been a rush of enthusiasm on Wall Street regarding Donald Trump’s election win, but hedge funds actually generate more alpha when the White House is occupied by a Democrat president than a Republican one, according to HFR, collating data going back to 1991.

When compared with the S&P 500, the industry underperformed regardless of who was president. But during Democratic administrations, the gap was about 183 basis points, with hedge funds delivering average, annualized returns of 10.16%, compared to 11.99% from the S&P 500. The underperformance gap during Republican administrations was 331 basis points. (1 basis point equals 0.01%.)

When compared with the a bond index, HFR found that hedge funds under both parties outperformed – with stronger alpha when a Democrat was in the White House.

The total net asset flows were higher under Republican administrations (about $450 billion) than Democratic ones (about $400 billion), even though since 1991, Democrats served six more years in the highest office than Republicans.

Surprisingly, the way that hedge fund participants donate in elections was a bit more tilted toward one party. According to a recent report by Open Secrets, in the 2024 election cycle, individuals in the industry donated $31 million to Democratic candidates, while almost half that amount — $16 million — went to Republican candidates.

Of course the takeaway here is that hedge fund returns are far more correlated with positioning relative to various asset-class performances than particular policies by the administration. So, it’s hard to make any predictions about what the next four years entails for the industry.

At Wednesday’s 14^th annual Delivering Alpha event, we should get a sense as to how money managers may be reconfiguring their portfolios.

Finance

Powell says the Fed doesn’t need to be ‘in a hurry’ to reduce interest rates

Published

1 hour ago

November 14, 2024

Business Finance News

Jerome Powell: Fed doesn’t need to be ‘in a hurry’ to reduce interest rates

Federal Reserve Chairman Jerome Powell said Thursday that strong U.S. economic growth will allow policymakers to take their time in deciding how far and how fast to lower interest rates.

“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said in remarks for a speech to business leaders in Dallas. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”

(Watch Powell’s remarkets live here.)

In an upbeat assessment of current conditions, the central bank leader called domestic growth “by far the best of any major economy in the world.”

Specifically, he said the labor market is holding up well despite disappointing job growth in October largely that he attributed to storm damage in the Southeast and labor strikes. Nonfarm payrolls increased by just 12,000 for the period.

Powell noted that the unemployment rate has been rising but has flattened out in recent months and remains low by historical standards.

On the question of inflation, he cited progress that has been “broad based,” noting that Fed officials expect it to continue to drift back towards the central bank’s 2% goal. Inflation data this week, though, showed a slight uptick in both consumer and producer prices, with 12-month rates pulling further away from the Fed mandate.

Still, Powell said the two indexes are indicating inflation by the Fed’s preferred measure at 2.3% in October, or 2.8% excluding food and energy.

“Inflation is running much closer to our 2 percent longer-run goal, but it is not there yet. We are committed to finishing the job,” said Powell, who noted that getting there could be “on a sometimes-bumpy path.”

The remarks come a week after the Federal Open Market Committee lowered the central bank’s benchmark borrowing rate by a quarter percentage point, pushing it down into a range between 4.5%-4.75%. That followed a half-point cut in September.

Powell has called the moves a recalibration of monetary policy that no longer needs to be focused primarily on stomping out inflation and now has a balanced aim at sustaining the labor market as well. Markets largely expect the Fed to continue with another quarter-point cut in December and then a few more in 2025.

However, Powell was noncommittal when it came to providing his own forecast. The Fed is seeking to guide its key rate down to a neutral setting that neither boosts nor inhibits growth, but is not sure what the end point will be.

“We are confident that with an appropriate recalibration of our policy stance, strength in the economy and the labor market can be maintained, with inflation moving sustainably down to 2 percent,” he said. “We are moving policy over time to a more neutral setting. But the path for getting there is not preset.”

The Fed also has been allowing proceeds from its bond holdings to roll off its mammoth balance sheet each month. There have been no indications of when that process might end.

Finance

Watch Fed Chair Powell speak live to business leaders in the Dallas area

Published

2 hours ago

November 14, 2024

Business Finance News

[The stream is slated to start at 3 p.m. ET. Please refresh the page if you do not see a player above at that time.]

Federal Reserve Chair Jerome Powell speaks Thursday to business leaders in the Dallas-Forth Worth area on monetary policy. Powell is delivering a speech followed by a question and answer session.

The appearance comes one week after policymakers again voted to lower their key interest rate by a quarter percentage point, or 25 basis points. That followed a half-point cut in September and left the federal funds rate in a range between 4.5%-4.75%.

Economic readings this week, though, showed that inflation has proven sticky, with consumer price inflation at 2.6% and prices at the wholesale level at 2.4%. The measures are considerably higher for core inflation, which excludes food and energy costs.

Markets expect the Fed to cut again in December then likely skip the January meeting as officials assess the impact of the policy easing moves so far.

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