US Stock Positioning Shows Downside Risk, Citi Says

Investors flocked to bullish bets on stock futures. us stocks at the end of June, with which the positioning was seen “very widespread” and increased the risk of a reversal, said strategists at Citigroup Inc.

Last week, new long positions of about $7.1 billion were added to S&P 500 futures, with “moderately large gains” to investors, according to a bank note dated July 3.

Although overall positioning is below recent all-time highs, “investors may still be expected to unload deposits to protect these gains in the coming week, considering how far the market has comesaid the strategist Chris Montagu.

While net positioning remains bullish, signs of caution are already appearing, he said Montagunoting that flows into Nasdaq futures last week were dominated by new short positions.

U.S. stocks are up in 2023, and the tech-heavy Nasdaq 100 has posted its best first-half gains ever on the backlog of AI and bets that the Federal Reserve will moderate its policy outlook.

But market strategists warn that enthusiasm could fizzle out in the second half, amid concerns about a recession and a weaker outlook for corporate earnings.

Among other points of caution, strategists at Goldman Sachs Group Inc. said it was too soon to rule out the risk of higher rates hitting stocks as stock-bond correlations turn more positive.