Stock exchange traded funds may continue their forward advance next year as the smart money remains largely bullish going in to the new year.
Bank of America Merrill Lynch sees hedge funds as “trend bullish” on the equities market as large money managers that focus on stacks are 36% net long, or in line with benchmark positioning of 35% to 40%, reports Lawrence Delevingne for CNBC.
Additionally, BofA found macro hedge funds that bet on broad macroeconomic trends were also adding bullish bets on the S&P 500 and Nasdaq.
“Technicals are bullish and [data averages suggest]longs may increase further,” according to the Ban of America report.
Year-to-date, S&P 500 ETFs, including, the SPDR S&P 500 ETF (NYSEArca: SPY), iShares Core S&P 500 ETF (NYSEArca: IVV) and Vanguard S&P 500 ETF (NYSEArca: VOO), have increased about 14.6%. SPY has attracted $22.1 billion in net inflows so far this year, IVV added $9.1 billion and VOO brought in $10.1 billion, according to ETF.com data. [U.S. ETF Assets Hit $2 Trillion Milestone]
The Powershares QQQ (NasdaqGM: QQQ), which tracks the NASDAQ-100, gained 20.7% year-to-date. However, QQQ saw $11.9 billion in outflows so far this year.
Additionally, Appaloosa Management’s David Tepper points out that the current market condition is shaping up similarly to what happened prior to the 1999 market rally.
“This year rhymes with 1998. Russia goes bad. Easing [is]coming from Europe. Sets up 1999…. [oops]I mean 2015,” Tepper told CNBC. “Worldwide money [was]made too easy for where USA fundamentals were in both late 1998 and 2014.”
While there are similarities, investors should not expect the same thing that happen in 1999 to repeat itself in 2015. For instance, in 1999, the S&P 500 jumped 20% and the Nasdaq Composite surged 85%.
Macro hedge fund investors also raised their long exposure to the U.S. dollar but trimmed short exposure to commodities and emerging markets, Final Alternatives reports.
The PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP) has increased 10.6% year-to-date and added $208.5 million in new assets this year. [Dollar ETFs Could Maintain Course Next Year]
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Max Chen contributed to this article.