Key points
- Citigroup strategists observe continued risk-taking by investors despite a decline in bullish momentum.
- S&P 500 and Nasdaq positioning remains largely unchanged, though weekly flows show ongoing risk appetite.
- Normalized bullish positioning is declining for the S&P 500 and Russell 2000.
- European and Chinese markets also exhibit bullish positioning, although the China A50 has seen some profit-taking recently.
Citigroup strategists have reported that investors are continuing to add risk to their portfolios, even as overall bullish momentum shows signs of weakening. While the positioning in major US indices, such as the S&P 500 and Nasdaq, remains relatively stable, weekly flow data reveals a consistent influx of risk capital. This suggests a persistent appetite for equities despite potential market uncertainties.
The strategists, including Chris Montagu, highlighted a downward trend in normalized bullish positioning. This decline is evident in both the S&P 500 and the Russell 2000, indicating a potential shift in investor sentiment.
However, they also noted that the profit and loss risks associated with current positioning remain relatively low for these indices. The Nasdaq, while exhibiting a slightly elevated risk of profit-taking due to one-sided long positioning, is not considered a cause for significant concern by the Citigroup team.
Looking across the Atlantic, European markets paint a similar picture. Positioning in the EuroStoxx, Germany’s DAX, and Britain’s FTSE remains bullish, although a marginal easing has been observed in recent weeks. This suggests a degree of caution, but overall sentiment continues to favor riskier assets.
In the Asian markets, the China-A50 index showed a notable decrease in positioning due to recent profit-taking activity. Despite this unwinding, both positioning and profit levels remain elevated and are the highest among all the indices tracked by Citigroup, indicating a significant level of bullish sentiment persists in this particular market.
