Ro_Patel
Sep 30, 2:34 PM
Barclays: Investors remain overweight equities, but positioning is far less stretched than at its early summer peak, improving the setup for stocks into year-end.
Equity inflows stayed strong in Sept at
$81B & are running at a record pace for the year
“But momentum is fading w/ funds seeing some outflows in recent weeks, while retail sentiment turned the most bearish this year, and macro hedge funds have largely exited longs,”
Systematic investors are now seen as the main support, w/ risk-control funds near peak exposure amid low volatility.
"Overall, positioning stays overweight equities, but is far less stretched than early summer highs & more dispersed across investor groups,"
Stocks have followed the usual seasonal pattern, w/ negative returns & narrower breadth in Sept
Barclays said 4Q seasonality & midterm election dynamics typically point to a rebound. Even so, it noted that erratic price action suggests a lack of conviction despite persistent fear of missing out
The bank said a year-end rally & a rotation back into Europe & cyclical laggards largely depend on oil prices falling or holding steady.
A US-Iran breakthrough would boost both stocks & bonds. Barclays added that the risk of oil staying higher for longer looks more priced into bonds than equities, & it said cheap volatility makes downside protection attractive.
Rising rates are also testing the case for owning stocks. With the US10-year yield well above 5%, Barclays said the equity risk premium has compressed. That challenges the "TINA" argument, according to the bank
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