Citi’s strategist Chris Montagu has issued a warning about the capped upside potential for U.S. equities as bearish positioning continues to rise among major indices. Following a temporary rally after the pause in tariffs, fresh short-selling activity has resurfaced, particularly within the S&P 500, Nasdaq, and Russell 2000, indicating potential further declines.

Current Bearish Positioning Overview

• S&P 500: Almost all long positions are now underwater, resulting in positioning profitability hitting multi-year lows.

• Nasdaq 100: Renewed short interest reflects a risk-averse attitude amongst technology shares.

• Russell 2000: This index exhibits the highest level of bearish positioning across U.S. stocks.

Regional Positioning Differences

• Europe (EuroStoxx/DAX): Overall sentiment remains near-neutral, with legacy long positions in red but not aggressively bearish.

• China A50: Trending towards neutral, suggesting mixed activity with both long and short positions unwinding.

• Hang Seng: Bullish sentiment is growing, a contrast to other regions.

• Nikkei 225: Currently the most bearish major index in Asia, though not at extreme levels.

Reasons Behind the Shift in Positioning

1. Uncertainty Around Tariffs: The inconsistent messaging from Trump regarding China tariffs has fueled risk-averse behavior among investors.

2. Fed Leadership Signals: Uncertainty surrounding the Federal Reserve’s stance due to mixed messages has put pressure on long positions.

3. Mixed Economic Data: Recent earnings reports and GDP figures (including U.S. durable goods and South Korea’s Q1 contraction) have reinforced cautious investor sentiment.

Looking Ahead

• FOMC Minutes and Speeches: These announcements will provide insights into future Federal Reserve actions.

• Updates on Trade Policies: Announcements regarding any tariff cuts will lead to immediate repositioning within the market.

• Upcoming Economic Data Releases: Key metrics, such as Flash PMIs and U.S. inflation data, will provide insight into growth prospects against policy risks.

Stay Informed on Market Activity

To monitor real-time shifts in market positioning across the S&P 500, Nasdaq, Russell, and other indices, utilize the
Entreprenerdly.com Market Most Active Monitor tool.