Evercore ISI released a list of stocks with negative beta. They want you to buy these when volatility shows up. September volatility, specifically. As if volatility checks a calendar.
Negative beta means the stock moves opposite the market. The market goes down, the stock goes up. This is the hedge. Evercore found dozens of them in the S&P 500. They compiled them into a list. They published the list right when September started and stocks stumbled. What are the odds.
The premise here is that September is scary. Stocks stumbled out of the gate. You need protection. But you needed that protection before September started, which means you needed this list in August. Evercore published it after the stumble. That's not a hedge. That's a participation trophy.
Here's what negative beta actually does. It underperforms when the market rips higher. It maybe performs when the market tanks. Maybe. Because beta is backward-looking. It measures what already happened. The stocks that moved opposite the market last year might not do that this year. But Evercore ISI believes they will. They believe it enough to name dozens of them.
Retail traders will read this headline. They will think hedging means buying a different stock. They will buy the negative beta names. Then the market will go up. Their hedge will eat shit. Their main position will also eat shit because they sold half of it to buy the hedge. They will have hedged themselves into a hole.
The real hedge against September volatility is not trading in September. Evercore ISI will not tell you that because Evercore ISI is a brokerage and brokerages need you to trade.
They named dozens of stocks. Dozens. If you need dozens of hedges, you don't need hedges. You need a new strategy.
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