The stock market bull run is crushing hedge funds that can’t figure out why stocks keep rising, despite indicators that they should be falling. Caerus Investors, a small New York-based equity hedge fund, just released its second quarter letter, which provides some insights into what’s going on. The rise of Donald Trump and global political populism, turmoil at the major party conventions in the United States, escalation of radical Islamic terrorism, the coup attempt in Turkey and related fallout, China’s debt crisis, yuan weakness and related economic slowdown, the EU’s troubled bank sector, negative interest rates throughout much of the developed world, the renewed bear market in oil, and, last but not least, Brexit, could individually or collectively upend the global economy and yet equities markets continue to rise. All of these concerns have justifiably kept most participants conservatively positioned. Yet, at every troubled juncture, the market has confounded its participants, successfully shrugged off bad news and galloped triumphantly to a new high. This bull is learning, adjusting and becoming harder to predict.
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