Investing.com -- Bullish positioning for both the S&P 500 and Nasdaq continued to decline last week, as policy risks and a softening macro-economic landscape amplify investor anxiety, according to Citigroup (NYSE:C).
The S&P 500 experienced a near $18 billion decline in notional positioning, marking one of the largest negative weekly flows in the past three years.
“The weaker trend has followed a period of growing economic uncertainty partly from policy risks, but more recently, a slew of macro-economic releases that have started to point towards an element of softening in US economic growth,” strategists led by Chris Montagu said.
The gloomy sentiment was also seen in growth stocks, with the Nasdaq seeing a marked decline in positioning. Still, the week-on-week changes in Nasdaq positioning, while substantial, were not as severe compared to historical patterns.
According to Citi, the latest weekly activity across U.S. indexes was predominantly characterized by new short positioning.
The S&P presented a more varied scenario with long unwinds and a modest amount of short covers, resulting in nearly neutral net positioning. In contrast, Nasdaq’s bullish positioning remains moderate, and the Russell 2000 has shifted to a slightly bearish stance.
“Across the three indexes, loss levels are greatest for Nasdaq. With all long positions currently offside and an average loss exceeding 4.4%, with downside risks elevated,” Montagu said.
“A recovery rally back to 21,300 could see some stabilization of this risk but there seems limited evidence of a potential catalyst for this,” they added.
In Europe, investor positioning for EuroStoxx and DAX has moderated over the past two weeks. Despite recent declines, EuroStoxx remains moderately bullish, while the DAX has seen a more rapid easing.
The FTSE has maintained bearish positioning for several weeks, with minimal change last week. There was no significant increase in bullish positioning; however, rising index levels have put existing shorts at a disadvantage, potentially leading to forced covering and amplifying further gains.
Asian markets have similarly witnessed negative flow activity. Although net positions have been reduced, the China A50 retains moderately bullish positioning. On the other hand, the Nikkei has edged towards neutral as new shorts entered the market.