According to a recent note by Citi analysts, investors remain neutral towards U.S. equities while having a bearish outlook on European markets. The firm’s equity markets positioning model indicates that market returns’ continued volatility has no clear flow momentum, leading to no direction for the markets. However, the setup with offsetting long and short positions could amplify market moves up or down in the near term.
US EQUITIES
The Citi analysts reported that the flows of U.S. equities have been modest and mixed, with recent short positions placed and then unwound again within a few sessions. However, post the roll flows have slowed down considerably. The lack of clear direction could be due to the ongoing concerns about inflation and the Federal Reserve’s policy.
EUROPEAN MARKETS
Citi’s analysts revealed that investors are more bearishly positioned towards European markets, with UK equities having one-sided positioning that is in profit. Bank futures show neutral positioning, and bank ETF outflows have undone the inflows earlier in 2023.
ASIAN EQUITIES
Regarding Asian equities, the Nikkei positioning remains the most bullish market, built up in early March and has been gradually fading. Citi’s analysts noted that the bullish positioning is still the strongest in Asia.
In conclusion, the Citi analysts recommend that investors stay neutral on US equities and bearish on European markets. However, with the offsetting long and short positions, the market moves could amplify up or down in the near term. Investors need to monitor the market closely and adjust their positions accordingly.
