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Citi's equity markets positioning model notes Europe and Asia are favoured as the US Lags

Citi's analysis highlights a shift in equity positioning, favoring Europe and Asia over the US, which is showing mixed signals with a bearish trend in the Nasdaq and Russell 2000.

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Citi's equity markets positioning model notes Europe and Asia are favoured as the US Lags

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  • US equity positioning is mixed; the bank notes that the S&P 500 saw a small increase in long positioning, while Nasdaq and Russell 2000 have both turned increasingly bearish. Citi says tariffs have returned to the spotlight, adding to already elevated policy uncertainty.
  • "Investors continue to diversify out geographically, with Europe benefiting from more positive flows," the bank writes, "FTSE positioning has returned to max long, and existing profit levels are extended, leaving elevated profit-taking risks." The EuroStoxx 50 saw further long additions, which Citi says strengthens its bullish stance, while European Banks remain moderately bullish, but new shorts in DAX pushed overall positioning closer to neutral.
  • In Asia, the KOSPI is nearing max long and Nikkei positioning continues to trend higher, Citi says. Existing long positions in S&P/ASX 200 have turned profitable, whereas China A50 and Hang Seng positioning remains slightly negative.
Context

The positive sentiment in Europe is underscored by strong flows and max long positioning in the FTSE, whereas risks in profit-taking are noted. This preference might influence investor strategy, leading to potential reallocation of funds into European and Asian markets amid growing policy uncertainty in the US.

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