Barclays: FOMO fever leaves positioning full, vulnerable to Tech faltering

Equity inflows have surged to three-month highs in June as global markets touched new peaks.

Unlike the earlier months of the year, this increase has been predominantly fueled by the US, leaving rest-of-world (ROW) equities, particularly in Europe, lagging. As a result, concentration and crowding around the US and technology sectors have increased even further.

Citing the NAAIM survey, Goldman Sachs strategists noted that active manager equity positioning was volatile in June, seeing a pullback at first before rebounding to previous highs. They said this is supported by CFTC data on asset manager equity futures positioning, which remains close to its peak.

Investor sentiment remains stable close to bullish levels, the AAII survey shows, though it is still marginally below the euphoria levels observed in March. Meanwhile, the fear and greed indicator has also moderated from the greed zone to more neutral levels over the past month.

According to Goldman, retail investors continue to consistently add equities to their portfolios. Although call option buying increased slightly last month, it remains below the year-to-date highs observed in March. Moreover, traditional retail ETF flows have been positive in recent weeks, driven by a fear of missing out (FOMO) that “keeps retail investors chasing the market.”

“Steady inflows and equity markets at the highs means US household balance sheets are loaded with equities now more than ever,” strategists said in a note.

“Their equity holdings as a share of financial assets has rebounded to a record-high level year-to-date,” they added.

Similarly, equity exposure among EU and UK households is also sitting at two-decade highs, but it is not above the dot-com era levels yet.

As for hedge and risk control funds, strategists pointed out that both have increased their equity exposure, whereas CTAs and risk parity funds have slightly de-risked, though they still maintain high levels of exposure.