(Bloomberg) - The prolonged slide in equity markets may finally be reaching a floor, at least for now, according to Citigroup Inc. strategists.
Slowing outflows from exchange-traded funds and repositioning in futures contracts indicate that “we are near peak investor bearishness across equity markets, though there are not yet any bullish reversals,” Citi strategists led by Chris Montagu wrote in a note to clients. “Going forward, there may increasingly be a bias towards unwinding the large short positions.”
Equity markets have struggled to find their footing this year amid concerns over a slowing economy, record inflation readings in Europe and the U.S., and a hawkish pivot by central banks increasingly anxious to tame soaring prices. The S&P 500 index is emerging from three consecutive weeks of declines, as persistent lockdowns in China and the war raging in Ukraine have further weighed on sentiment.
In a potential sign that investors don’t expect the selloff to worsen, future positioning in European banks is again net long, while a longstanding net long positioning on the FTSE 100 index increased last week, Citi’s strategists said in their note. Meanwhile, outflows from ETFs slowed to $2.5 billion from a record $25.5 billion the week before, they said.
By Nikos Chrysoloras
