After a meeting with President Barack Obama, JPMorgan Chase & Co’s (NYSE:JPM – News) Chief Executive Jamie Dimon said that March was “a little tough” in comments to CNBC. The bank’s shares fell nearly 5 percent.
That’s a strange statement considering equity markets rallied in March, with the S&P 500 up more than 8 per cent. Banks had already enjoyed profitability in the first two months of the year as well. New numbers from Hedge Fund Research might be able to shed some light on the situation. Here’s the FT story:
Some hedge fund strategies completely missed the upside of the equity markets in what many analysts were describing as a bear market rally.
Many hedge funds have taken a step back from directional bets on the stock markets against the backdrop of the heightened volatility that has accompanied the financial crisis.
Here’s the relevant bit from HFR, which tracks hedge funds’ performances. Click to enlarge.
The worst performance was from the Short Bias Index, — it was burnt by the rally. If investment banks were following a similar trading strategy, shorting stocks like financials in anticipation of a continued bear market, they would have been burnt too. Clusterstock describes it with a healthy dose of irony pretty succinctly:
In other words, the trading performance at banks may have been hurt by the rally in financial stocks.
Worth adding that the fading of temporary developments like QE-induced fixed income boosts may also be starting to contribute to new troubles for the IBs.
Related links:
The return of the IB capital call – FT Alphaville
Meredith Whitney speaks on bank profitability – FT Alphaville