Activist Investor Warns US Stocks Could Fall 40% More

Activist Investor Warns US Stocks Could Fall 40% More

almost 4 years ago2 mins

New data out Thursday showed investor activism declining as companies concentrate on surviving coronavirus – but $40 billion hedge fund Elliott Management simultaneously sounded a fresh alarm for stock prices 🚨

What does this mean?

Analysis from investment bank Lazard revealed that while the start of 2020 saw a bumper crop of activist shareholder campaigns, March was the slowest month since 2013. Typical targets are currently more worried about conserving cash than demands for investor payouts or mergers and acquisitions – and activists don't want to be seen getting in the way.

Many investors are accentuating the positive. US share prices are, incongruously, back in “bull market” territory. And while fresh American jobless figures on Thursday took total layoffs for the last month to 22 million, growth was slower than the week before.

US unemployment may now stand at 17%
US unemployment may now stand at 17%

With some signs of economic stabilization, many big banks now think US stocks’ lows are behind them. But Elliott, famed for its farsightedness (and pessimism), begs to differ. In a letter to clients, it warned that global share prices could well fall again – to more than 50% below their February highs 😱

Why should I care?

Elliott was last in the news at the start of March pushing for change at the top of Twitter, partly due to its CEO’s dual role running payments company Square. The latter firm could yet benefit from helping distribute stimulus payments to Americans, even if it’s hurt by a lot less consumer spending. Elliott certainly isn’t doing too shabbily: while the average hedge fund lost 8% in the first quarter of 2020, it turned a profit.

Data correct as of March 27
Data correct as of March 27

Past performance is, of course, no guarantee of future success – and the activist may well have a financial interest in stocks falling thanks to its “short” positions. But Finimizers who share Elliott’s concerns that a rapid recovery from coronavirus may be wishful thinking – and that US stocks could fall 40% below their current levels – may wish to take note and act accordingly… 🧐

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