Global long/short hedge funds missed out on a big stock market jump on Wednesday when U.S. President Donald Trump said he would pause some tariffs for 90 days. On that day, these hedge funds made a small gain of 0.98%, while the S&P 500 jumped by a stunning 9.5%, according to data from Morgan Stanley.
U.S. hedge funds did better than their global counterparts, with a gain of 2.28%, but they still didn’t do as well as the S&P 500. Trump’s announcement caught many by surprise. Just a day earlier, investors were worried that new trade rules could hurt the economy, leading to a sell-off in U.S. Treasury bonds. However, after Trump’s news, stock prices soared, and bond yields fell a little.
Many hedge funds had short positions, betting that prices would go down. Last week, they sold a lot of stocks, marking the biggest sell-off in almost 15 years, and were the most pessimistic they’d been since 2011, according to Goldman Sachs. With fewer stocks they expected to rise, hedge funds couldn’t take full advantage of the market rally.
After Trump’s announcement, some of these hedge funds tried to cover their short bets, as explained by Jon Caplis, CEO of a hedge fund research firm called PivotalPath. Still, long/short hedge funds were doing better than the S&P in 2025. From the start of the year until April 10, global hedge funds were down 3.14%, while U.S. funds fell 4.07%. In the same timeframe, the S&P 500 dropped by 6.9%.
Investors also seemed worried and continued to reduce their risk by cutting down on their investments.
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