Investors Remain Bullish on US Equities

Investors are still bullish on US equities, although recent momentum in the S&P 500 and Nasdaq 100 has weakened as markets hover near their peaks, according to Citi strategists in a Monday note.

This suggests that despite the expected easing of U.S. policy in the coming months, investors’ enthusiasm remains tempered. Recent weekly data indicates new risk flows into both indexes, but positioning activity has been mixed, resulting in only a modest increase in bullish stances. The risks are more evident in the Nasdaq, with 79% of long positions currently in loss.

Though average losses are minimal, Citi warns that a further decline below 19,000 could lead to significant build-up of losses and amplify downside pressure.

US stocks climbed on Friday, with the Dow Jones Industrial Average setting a new record as investors finished a turbulent month positively. The 30-stock Dow rose by 228.03 points, or 0.55%, to finish at 41,563.08.

Meanwhile, the S&P 500 increased by 1.01% to close at 5,648.40, and the Nasdaq Composite, heavily weighted towards technology, rose by 1.13% to end the day at 17,713.62.

European equity indices also rose over the week, buoyed by an improving inflation outlook according to Eurozone inflation data. Positioning in Europe showed constructive sentiment, with new risk flows across the indexes. However, overall gross positioning in most regional indexes began from a low base, suggesting a positive but limited risk appetite for most European indexes, as noted by Citi.

In Asia, investors remain long and optimistic about KOSPI and Nikkei. However, persistent macroeconomic challenges dampen this optimism. According to Citi, bearish positioning grew over the week, with China A50 positioning remaining the most bearish among the indexes tracked.