Investing.com -- Citi’s Chris Montagu is warning that downside risks for U.S. equities, particularly the S&P 500, remain a concern as bearish positioning picks up again following a brief period of relief after the latest pause in tariff announcements.
“Positioning is bearish for S&P and Nasdaq, and more elevated for Russell 2000,” Montagu said in a note. “Further downside risks remain persistent for the S&P, with nearly all longs in loss, which is driving positioning profitability to extended loss levels.”
Investor sentiment had briefly stabilized following the tariff pause, but Montagu notes that renewed short positioning flows have returned in force across all major U.S. indexes over the past week.
The reversal reflects a broader retreat from risk, with long positions on the S&P 500 under particular pressure due to mounting unrealized losses.
In contrast, European equity positioning has been more stable.
"Levels are near neutral for EuroStoxx and DAX, with investors still constructive on European banks. Risk to the downside are prevalent in EuroStoxx positioning, notably for the larger legacy long positions that are deeply in loss," Montagu wrote.
Flows in Europe have been mixed and show little sign of a directional shift, suggesting that investors remain cautious but not aggressively positioned for a downturn.
In Asia, the China A50 index has reverted to a neutral stance following a notable decline in gross positioning, driven by a mix of unwinds from both long and short positions.
Meanwhile, the Hang Seng has seen a rise in bullish sentiment, while Japan’s Nikkei stands out as the most bearish index in the region, though without positioning reaching extreme levels.