The sudden reintroduction of volatility to the stock market likely will help hedge funds, which are coming off their best start to the year in more than a decade.
As equities started out on fire so did hedge funds, which rose 2.8 percent in January as measured by the HFRI Fund Weighted Composite Index. The performance was the best first month for the industry since 2006 and the top month overall since December 2010.
Despite the powerful month, the $3.2 trillion industry still underperformed basic stock market indexes. The S&P 500 posted a total return of 5.7 percent as the market roared out of the gate before suffering a rough start to February.
The performance came as volatility in "global equities, currencies (including cryptocurrencies), commodities, fixed income and the outlook for global inflation all increased," HFR President Kenneth J. Heinz said in a statement.
"Hedge funds will continue to navigate these volatile markets and asset classes in 2018, monetizing opportunities generated by US tax cuts and infrastructure spending, US monetary policy, and corporate M&A and special situations," he added. "These themes are likely to drive performance and industry growth in 2018."