Pranav Kashyap
2 min read
Investing.com – Global equity positioning has plummeted to a massive underweight, registering one of the sharpest weekly declines on record as forced unwinding hammered the technology sector, according to a new research report from Deutsche Bank.
The firm’s consolidated measure of equity positioning plunged to the 20th percentile. Discretionary investors drove the retreat, with their positioning tumbling to the bottom 3% of its historical band, while systematic strategies rapidly slashed their exposure back to neutral.
The rapid exit signals extreme investor pessimism, with large-cap positioning now aligning with expectations of zero corporate earnings growth. Deutsche Bank strategists noted this sharply contradicts current market fundamentals, given the median S&P 500 company just posted nearly 15% earnings growth in the third quarter.
Technology stocks served as the epicenter of the rout, with sector positioning breaking below the broader market to hit lows unseen since “Liberation Day”. Current positioning implies that tech earnings growth is turning negative, despite the sector posting a massive 53% aggregate growth rate in the third quarter.
While market chatter blamed the tech sell-off on the recent “blue sweep” in the U.S. mid-terms – sparking fears over bipartisan opposition to data center expansions – Deutsche Bank attributed the plunge primarily to a “forced positioning unwind”.
Despite the grim sentiment, the bank remains aggressively bullish on the sector. Strategists reiterated an “overweight” rating on tech, arguing the recent collapse has created a highly favorable risk-reward setup and describing the market as a coiled spring.
Surprisingly, the massive positioning unwind coincided with aggressive capital allocations. Global equity funds absorbed $89.2 billion over the week, hitting a 20-week high.
This surge was dominated by emerging markets, which registered a record $45.1 billion influx. Chinese equities absorbed the bulk of the emerging market flows with $34.5 billion, followed by Taiwan with $8.6 billion. Even battered technology funds absorbed $14.5 billion, indicating strong dip-buying behavior amidst the widespread market chaos.
Original Article
Equity positioning suffered one of its sharpest weekly drops on record: DB
