Time to diversify your diversifiers with hedge funds?
In recent months, financial markets have faced significant turbulence. Relatively risky assets, particularly equities, have experienced double-digit declines. The S&P 500 Index, a proxy for US equities, is down more than 15% from its February 2025 highs, and many companies have seen even more substantial declines in valuations. This downturn has been accompanied by concerns about a growth rerating (lower), which has dealt a blow to market breadth — with many equity indices falling below their 200-day moving averages and recording lower lows in six out of the past seven weeks at the time of writing. 1
What’s causing this?
Doubts about markets’ ability to hit growth expectations appears to be the force behind this bout of market volatility. This comes at a time when, in some cases, certain assets appeared to have been "priced to perfection." At the same time, other warning signs, such as weakening consumer data (e.g., credit card delinquencies) and decelerating earnings revisions, have been emerging. Additionally, the frenetic pace of new policies and actions taken by the new US administration , including “ reciprocal” tariffs , questions over spending cuts and US deficit expansion, and immigration policies , could have added to investors’ anxiety.
