GOAL POSITIONING
Cross-asset positioning turning more defensive
GOAL POSITIONING Cross-asset positioning turning more defensive
Our sentiment and positioning indicator turned more negative and fell to the 46th-ile, reaching its lowest level since April, decoupled from continued strong Global PMIs. Stronger fixed income fund flows (Exhibit 12), the sharp decline below zero in our Risk Appetite Indicator, and increased positioning in traditional safe havens (Gold, JPY) have been the largest drags. Equity volatility increased modestly but much less than bond volatility and systematic investors’ positioning (CTA, risk parity) remains ‘risk-off’. Hedge fund net leverage has fallen sharply in recent days, while gross leverage has remained broadly unchanged (Exhibit 65).
Rates positioning remains bearish but less so in the frontend (Exhibit 55). Asset managers have further reduced exposure to long-dated US Treasury futures (Exhibit 5) and our rates team’s US Fund Positioning Indicator (FPI) indicates a shift to underweight duration during the recent rates selloff. European money market funds experienced some of the strongest swings in flows in recent years due to sovereign risk repricing influencing excess liquidity and reserves. Historically, flatter yield curves have tended to precede stronger money market fund inflows.
The AAII survey reinforces a more cautious picture: Conviction is high and above the YTD median (i.e., few respondents are neutral) but overall balanced across bulls and bears (Exhibit 1). Historically, at conviction levels above the current level, subsequent returns to neutral AAII readings are showing a higher volatility vs. those with lower conviction levels (Exhibit 2).
There have been similar defensive rotations within equities. Momentum ETFs recorded an estimated $5.1bn of outflows in September, among the largest monthly outflows in recent years (Exhibit 6), and global leveraged Technology ETFs across regions have seen their AuM decline further (Exhibit 7). Broader sector flows show a rotation towards more defensive exposures: Telecoms recorded the strongest flows in
Fixed income remains the clearest destination for fund flows (Exhibit 16). Bond fund flows have outpaced equity flows across both U.S. and Western European-focused funds, led by short-term government and inflation-protected bond funds (Exhibit 3). CLO ETFs also continued to attract inflows over the past month, as a high carry alternative to securitized credit exposure (Exhibit 4).
relative terms, while Utilities and Infrastructure also attracted inflows. Technology and Energy saw inflows last week, while Financials and Industrials recorded the largest outflows, with Consumer Goods also negative (Exhibit 8).
Safe-haven positioning completes a more defensive cross-asset positioning picture. Speculative (non-commercial) investors increased long exposure to JPY and reduced net short positions in CHF futures (Exhibit 9), despite the stronger US Dollar positioning (Exhibit 50). In contrast, EUR and GBP positioning remains very negative (Exhibit 52). Gold futures positioning remains elevated (Exhibit 48), while physical ETF holdings have increased despite recent price weakness (Exhibit 10).
<
Our positioning and sentiment indicator is at the 46th-ile
Source: Datastream, Haver Analytics, Goldman Sachs Global Investment Research
10 charts we are watching: Cross-asset positioning turning more defensive
Cross-Asset Global Fund Flows: YTD
Cross-Asset Global Fund Flows: 4-week, 3-month, 12-month
Cross-Asset Global Fund Flows: Cumulative & 1-month rolling by asset class and region
Cross-Asset Global Fund Flows: Risky vs. Safe Assets
Cross-Asset Global Fund Flows: Cumulative & 1-month
Cross-Asset Global Fund Flows: Fund Flows Cycle Across Assets
<<
Equity Global Fund Flows: Foreign/Domestic Investor Flows
<<
Equity Global Fund Flows: Foreign/Domestic Investor Flows
Global Equity & Bonds Mutual Funds Allocation
CTAs: Performance Sensitivities
Gold, JPY and the Dollar
CFTC Cross-Asset Positioning
Cross-Asset Skew Monitor
Risk Parity, Hedge Fund Leverage and Surveys
Appendix
Investors Intelligence Survey: Created in 1963. The survey is carried out by the investment services provider Investors Intelligence and covers the market views of 130 independent newsletters (brokerage house letters excluded), most of which are published weekly. The list of advisers is reviewed thanks to Barron’s or web searches. The survey reports the findings as the percentage of advisers who are bullish/ bearish/ expect a correction, and is based on the question “are you telling their readers to buy or sell?” The survey is released each Wednesday morning, with most of the opinions written prior to the previous Friday’s market close.
AAII Sentiment Survey: Sentiment of individual investors (bullish or bearish) towards the stock market over the next 6 months. The data are weekly since 1987 and are collected by the AAII (The American Association of Individual Investors) via a survey of a subset of their members. Response rates vary, but on average they obtained 315 responses each week from the start of 2013, for example, with the weekly period defined as from Thursday to Wednesday. During this window, AAII members participate by visiting the Sentiment Survey page on AAII.com and voting. The survey is open to all members, although a weekly email is sent to a rotating group of members reminding them to participate. Results are published online early each Thursday morning. Prior to the year 2000, members responded by physically mailing a postcard back to the AAII offices. The typical AAII member is a male in his mid-60s with a bachelor’s or graduate degree. AAII members tend to be affluent with a median portfolio size in excess of $1 million. The typical member self-describes as having a moderate level of investment knowledge and engaging primarily in fundamental analysis. AAII has in excess of 160,000 members and, simply due to the sheer size of membership, there are wide variances in wealth, investment knowledge and investing styles.
CBOE Put/Call Ratio: Calculated as the ratio of put options volume traded relative to the call options volume traded as reported at the end of each day. It is compiled at a daily frequency and comprises single stock and index options. It excludes exchange-traded products.
CFTC Future data: CFTC reports are published on Friday each week, reflecting current positioning as of the close on the
the CFTC.
EPFR Fund Flows Data: Fund flows data track more than $25trn AuM of global mutual funds and ETFs. We collect data with a weekly frequency, and they reflect fund flows as of Wednesday’s close.
<<