Last week, just as Marko Kolanovic was once again telling his clients to dump stocks even as the JPMorgan trading desk was once again taking the opposite side of the trade, we pointed out a curious divergence: while traditional, "long only" funds were dumping stocks at the fastest pace all year, Hedge Funds had unleashed a BTFD frenzy, translating into the biggest buy skew of the year, triggered by the dip ahead and after the staged Iranian retaliation on Israel (which they bought), when futures tumbled overnight only to stage a dramatic recovery on Friday, and then also bought the dump in the early part of this week which then proceeded to meltup, and close near 2-week highs despite surging yields.
In other words, hedge funds were right once again, while the dumbest and slowest money of all, Long Only mutual funds, were left chasing the meltup, as US stocks traded higher on Friday with the S&P 500 ending a 3-week losing streak (+2.7%), as investors digester higher inflation news, a mixed Q1 GDP report, and largely constructive earnings prints. Bitcoin Sensitive Stocks, China ADRs, and AI Enablers outperformed on the week, while Inflation Winners, Wage Sensitive Names, and Momentum Shorts underperformed.
