The majority of hedge funds have managed to stay on top of market ups and downs so far. Analysts, however, have pointed out that they may find it challenging to continue doing this in view of the expected US interest rate cuts.
Hedge Funds Turning To AI For Market Outlooks
In recent weeks, hedge funds have appeared more cautious in their investment strategies. A TradingView report shows that many of these pooled-capital outfits have lowered their market exposure, and this may suggest wariness regarding the current economic clime.
The latest predictions hint that the US Federal Reserve might start slicing interest rates in September 2024. This ongoing delay hobbled the markets, making them more volatile – a condition often exploited by seasoned hedge funds.
According to TradingView, in the past, lower interest rates “made it more challenging for hedge funds to generate alpha as near-zero interest rates impacted the discovery of new asset prices”. Similarly, hedge funds found the high interest rates in the wake of the COVID-19 pandemic to be beneficial.
Don’t miss out the latest news, subscribe to LeapRate’s newsletter
Economists believe that hedge funds are increasingly adopting and relying on artificial intelligence (AI) to predict market movements in times of uncertainty. Generative AI, which could potentially provide significant data insights, is reportedly on track to reach a value of $1.3tn by 2032.
A recent survey showed that approximately 86% of hedge funds are equipped with AI functionalities. The predicted US Federal Reserve rate cuts will be one of the tests for this technology.
Experts claim that generative AI has the ability to analyse large data volumes and make consequent actionable predictions. This data includes histories, trading volumes and economic drivers.
