Like so many investors George Soros has found it difficult to judge the direction of the US stock market since Donald Trump became president. Despite concerns about the man himself and his ability to deliver much hyped policies, stock markets had continued to go from strength to strength until earlier this week. Amid dangerous talk of impeachment, the rumours of Russian interference in the US presidential election will just not go away.
Recent filings by George Soros indicate that he has increased his “put options” via the S&P 500 and the Russell 2000 indices.
What are put options?
Put options are basically the opportunity but not the obligation to sell a stock or a market at a predetermined level. In many ways they offer a kind of insurance when investors are unsure of the short to medium term direction of markets. It will be interesting to see which fund managers have increased their put options when the next filings are announced. Many believe we will start to see a shift towards put options in the short to medium term with concerns that the markets have pushed too far too quickly and Donald Trump could be in serious trouble.
Betting against the market
It is interesting to see that George Soros began his “bet against the market” back in 2016 and has continued to increase his position over the last few months. There is growing concern within markets and indeed earlier this week we saw the largest one-day fall for the Dow Jones industrial average in 2017. There was a partial rebound on Thursday but all eyes will be on Friday mornings open – the next few weeks will be crucial.
George Soros increased his Russell 2000 puts by 36% and his S&P 500 puts by 162% in the first three months of 2017. This is a serious escalation in his bearish outlook for the US market although it is also worth mentioning that he was an investor in Snapchat and is now 15% on the wrong side after the recent fall. In fairness he did increase his stake in Facebook with the share pricing rising by nearly 30% over the last few months.
Are investors turning bearish?
There were serious concerns that Thursday may see more follow through on Wednesday’s significant falls but there was a slight rebound in the Dow Jones industrial average. This will have given some investors a little more confidence that we are not on the verge of a significant downturn but much of this will depend upon the performance of Donald Trump in the coming days and weeks.
A number of investors are sitting on significant profits having taken advantage of the increase in markets since Donald Trump became president. It will be interesting to see whether recent volatility prompts at least a partial banking of some profits amid uncertainty about the short term direction of markets. In the current climate would you blame anybody for taking a profit?
At this moment in time nobody really knows how Donald Trump will react to growing pressure from both his own party and other politicians. Some experts believe that the White House needs to “get its head down” and avoid any more controversy in the short to medium term in order to give markets time to settle. Can Donald Trump manage to stay out of trouble?