Robert Citrone has grown much more confident about the economy and the future direction of the stock market in recent months. Even so, the Tiger Cub is reducing his bets on equities in general.

At least for now.

“Although I do not foresee a recession and remain confident that growth will be strong heading into 2026, market expectations have moved considerably, especially given the softer data and mixed policy signals we anticipate in the near term,” Citrone told clients in his latest monthly missive, dated May 30 and seen by Institutional Investor. “As a result, I plan to reduce exposure in anticipation of a market correction in the coming months, which should create a more compelling entry point for risk heading into year-end.”

This pullback comes as Citrone’s hedge fund firm, Discovery Capital Management, was up a strong 7 percent in May, boosting its gain for the year to 10 percent, according to the firm.

Discovery is a combination macro and fundamental equity hedge fund with a strong exposure to non-U.S. and emerging markets. It posted huge gains of 52 and 48 percent in 2024 and 2023, respectively.

Discovery told clients that in May all of its asset classes made money, highlighted by strong performance in core positions in AI infrastructure, Argentina, government-sponsored enterprises, and Nigeria. The firm reminded clients in the monthly report that it had “meaningfully increased overall portfolio net exposures starting in April,” adding, “We covered short positioning post the tariff sell-off and maintained a more constructive stance throughout May.”

Now, however, Discovery believes this positioning “is entering its later stages,” noting that major indices have rallied more than 20 percent from their lows earlier in the year.

“We continue to anticipate policy volatility, and while we expect eventual resolution on several trade fronts, the final outcome will likely involve a meaningful shift that flows through to underlying fundamentals,” the letter elaborates. Discovery notes that market sentiment has “justifiably” improved on tariff flexibility and as fiscal frameworks have shifted from austerity toward increased deficit spending. “That said, this dynamic will face limits, particularly as higher interest rates serve as a natural constraint on further stimulus.”

Citrone stressed he does not foresee a recession — something he predicted a few months ago, albeit a shallow one. He said he remains confident that growth will be strong heading into 2026 and that market expectations have moved considerably, “especially given the softer data and mixed policy signals we anticipate in the near term.

As a result, Citrone has decided to pull back on his market exposure. II has reported this year about Discovery’s increasing bearishness thanks to the uncertainty in the markets in the lead-up to the March tariff announcements.