Here’s why the world’s biggest publicly traded hedge fund is cautious on stocks right now

  • Man Group’s Mark Jones says he’s cautious on the stock market right now. 
  • Stocks are facing deteriorating fundamentals, the Deputy CEO said on a recent podcast.
  • “I think the risk-reward in equities is very, very tough at the moment,” he said. 

Man Group’s Mark Jones is cautious on stocks despite a rally that shook off March’s banking chaos and markets seemingly pricing in a soft landing of the economy this year. 

The deputy CEO of the largest publicly traded hedge fund broke down why he’s skeptical of equities as investors are forced to navigate a myriad of macroeconomic challenges, chalking up the market’s resilience to a head fake.

“There’s an insidious sort of force on real assets that hasn’t been around for a long period of time,” Jones said in Bloomberg’s What Goes Up podcast on Friday. “I think the risk-reward in equities is very, very tough at the moment.” 

The first reason to be cautious is stock fundamentals will likely deteriorate, Jones says, adding there’s potential for further cuts in company earnings expectations.

Others on the Street are making more extreme calls. Goldman Sachs strategists forecast that US corporate profits this coming earnings season are set for their biggest decline since the beginning of the COVID-19 pandemic, with earnings per share expected to decline 7% year-over-year, according to a note from the bank published this week. 

Second, Jones said look at investment flows. Investors are moving their money from stocks into alternatives like government bonds and corporate credit.

“Whether that’s the consumer or whether that’s big institutional clients starting to come back to an asset class that, frankly, had fallen relatively out of favor, some of that flow of funds is also an issue for equities as just people move money around,” he said. 

Highlighting that point, Goldman Sachs said it expects American households to sell $750 billion in equities this year amid higher interest rates and persistent inflation. 

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