Equity positioning nowhere near capitulation levels: Barclays

Investing.com -- Equity positioning has softened but remains far from capitulation territory, according to a note from Barclays analyst Emmanuel Cau on Wednesday, who said recent de-risking by fast-money investors has not been matched by long-only outflows.

Cau wrote that hedge funds and CTAs “de-grossed considerably as markets turned risk-off,” with systematic exposure cut “sharply to neutral.”

But despite the pullback, he stressed that “aggregate equity positioning is nowhere near capitulation levels, as equity inflows were near record highs again in March.” 

Sentiment surveys have turned bearish, he added, but “are not yet at contrarian levels that typically mark ‘close your eyes and buy.’”

Barclays said positioning is “cleaner but not depressed,” noting that steady long-only inflows mean the so-called “Trump put still prevails.” 

The bank noted that investors remain tilted toward a de-escalation scenario around the Iran conflict, even as the market continues to underprice left-tail risks.

Cau highlighted cross-asset flows, suggesting the war is being interpreted as “a price shock, not a growth shock,” with equities seeing more inflows than bonds month-to-date, a pattern reminiscent of early 2022. 

Oil longs have risen, while gold and copper positions have been pared. Meanwhile, CTAs have slashed rates exposure to below neutral, a move Barclays said “may be prone to reversal if the war de-escalates.”

On regional flows, Barclays said “U.S. exceptionalism” has re-emerged as U.S. equity inflows outpaced the rest of the world. Europe saw slower but still positive inflows, though Germany and Spain recorded small redemptions.

Options markets, Cau added, reflect “stress, not panic,” with investors “cautious, lacking conviction but not capitulating.”