The Standard & Poor's 500 index might fall as much as 7% because of economic weakness in Europe, according to hedge fund manager Barton Biggs.
“I may want to take a little risk off,” Mr. Biggs, founder of Traxis Partners, told Bloomberg. “I'm looking for a 5(%) to 7% correction as the most likely possibility.”
Mr. Biggs on March 20 said that his net-long position in stocks, a gauge of bullish vs. bearish investments, was about 90%, up from 65% in January. His optimism fluctuated along with the market, with at least eight changes to the long component in the past six months, according to interviews with Bloomberg.
“I am cutting back a little, and I'm tempted to cut back some more,” Mr. Biggs said Thursday. Equities are “going higher over the course of the next few months, but in the short run here we'll have a little pause.”
The S&P 500 rallied 12% in the first three months of the year, its best first quarter since 1998, amid signs the U.S. economy was strengthening and European leaders were making progress to stem the region's debt crisis. The benchmark gauge for U.S. equities retreated 1.4% in the previous two days as minutes from the Federal Reserve's last policy meeting damped speculation about additional stimulus.
Europe is in a deepening recession, according to Mr. Biggs, who cited German industrial output figures that fell 1.3% in February, more than economists' forecasts.