Source: Zhitong Finance

The resilience of large economies such as the US was stronger than expected, hurting bears betting on a recession. More and more people think that the US economy can achieve a “soft landing,” that is, the Fed can contain inflation without triggering a recession.

Five hedge funds shared their trading ideas for soft landing scenarios.

1. New Holland Capital

The asset management scale of New Holland Capital is 6 billion US dollars. The fund is mainlyFocus on the primary stock market.

Bill Young, Co-Chief Investment Officer of New Holland Capital, said that market rhetoric has shifted to a soft landing and declining volatility.

He believes that a soft landing may boost trading volume in major stock markets, and that the company first raised capital through an initial public offering (IPO). According to Refinitiv's data, so far this year, the number of company IPOs is at its lowest level since the peak of the pandemic in 2020.

“You can only keep this faucet off for so long,” Young said. “Ultimately, companies will need access to capital markets.”

He said hedge funds often trade in financing activities, IPOs, subsequent secondary offerings, and the purchase of inexpensive warrants. His multi-strategy hedge fund employs investment managers who are good at dealing with recession and soft landing scenarios.

2. Weiss Multi-Strategy Advisers

Weiss asset management is $3.1 billion, and its main transactions are:Bet on companies/indices that are not rebounding this year; shorting expensive stocks/indices that have already risen.

Michael Edwards, Deputy Chief Investment Officer of Weiss, said that Weiss is betting on a soft landing in the US economy.

He expects that as the US interest rate hike cycle comes to an end and inflation is “relatively moderate,” more companies, including manufacturing, will benefit from economic growth.

Driven by optimism about artificial intelligence, the rise in the stock market this year was mainly concentrated in the technology sector. The NASDAQ index, which is dominated by technology stocks, has risen 27% so far this year.

Edwards expects that from now on, this situation will be reversed and that underperforming companies will recover. He suggested going long on the Russell 2000 index, which represents small-cap stocks, and shorting the Nasdaq index at the same time. The Russell 2000 Index has only risen 5% so far this year.

3. Maerli Capital

The asset management scale of Maerli Capital is 300 million euros (US$328 million). Its main transactions are:Shorten the Russian ruble and Moscow Exchange futures, and go long on Gazprom, Lukoil, and Russian gold mining stocks.

Maerli Capital founder Anastasia Tarasova believes that the Russian economy affected by the Russia-Ukraine conflict and Western sanctions will not have a soft landing.

She will short stock futures on the Moscow Exchange and the exchange rate of the ruble against the US dollar, but invest in undervalued stocks such as Gazprom, Lukoil, and Goldmine.

4. Swiss Union Bank (UBP)

UBP's assets reach 160 billion US dollars, and its Japanese stock long/short hedge fund is about 100 million US dollars. The fund's main transactions are:Go long into Japanese exporters and short out heavily indebted Japanese companies.

Zuhair Khan, senior portfolio manager at UBP Investments, believes that the yen will continue to be suppressed by high US interest rates and the Bank of Japan's cautious attitude in the near future.

Given strong demand in the US, Khan favors stocks of Japanese companies that export goods to the US. In July, Japan's exports to China, its largest trading partner, fell 13.4% year on year, while exports to the US rose to a record high.

Khan believes that the yen will slowly strengthen, but not enough to damage exporters' profits.

He is optimistic about companies that export electronics, specialty chemicals, and automotive and mechanical products.

He will short heavily indebted Japanese companies that are sensitive to high interest rates, including certain materials, transportation, catering, and utilities stocks.

5. Blackbird

Blackbird was founded in 2019 and its trading philosophy is:Buy high-dividend commodity stocks and sell both call options and put options at the same time.

Blackbird founder Dan Izzo said he would invest in high-dividend energy companies while selling both bullish and bearish derivative options.

Blackbird “supports some soft landing ideas that the market will not collapse because the market is mostly sideways, interest rates and inflation will continue to rise over time, and commodities will rise with inflation,” Izzo said.

Izzo says one way to invest is to establish$Devon Energy (DVN.US)$Take a long position and sell the stock's call options and put options to increase the possibility of profit and prevent the stock price from rising or falling. Devon Energy's dividend yield was 10%.

Editor/Jeffrey