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Investing.com - Citi analyst Chris Montagu has warned that Nasdaq positioning is reaching stretched levels, which could increase near-term profit-taking risks for the tech-heavy index. This comes as the S&P 500, tracked by SPY, trades just 1% below its 52-week high of $626.28, with a robust 14.15% return over the past year.
The analysis highlights continued bullish momentum for U.S. equities led by Nasdaq, with weekly activity showing almost exclusively one-sided movement dominated by new risk flows. This positioning trend raises concerns about potential market vulnerability. InvestingPro data reveals the S&P 500’s strong momentum, with a 7.34% year-to-date return and an impressive Financial Health Score of 2.75 (GOOD).
In Europe, positioning continues to hover around neutral levels, with investors reducing exposure to the DAX and FTSE 100. The FTSE 100 has seen positioning cuts for four consecutive weeks, while European Banks maintain somewhat bullish levels.
Asian markets show varied positioning trends, with China A50 experiencing the largest one-week rise in positioning levels compared to all indices tracked by Citi. South Korea’s KOSPI leads the bullish momentum in Asia alongside China A50.
Profit-taking risks remain particularly elevated for KOSPI as its positioning is stretched on a three-month basis, according to the Citi analysis.
In other recent news, Citi has forecasted a rise in the unemployment rate to 4.4% in the upcoming June jobs report, with payroll job growth expected to slow to 85,000. This development indicates a cooling labor market, which Citi believes could lead the Federal Reserve to resume cutting interest rates in September. In the ETF market, JPMorgan’s Delta One Desk reported a stabilization in equity ETFs with $17.4 billion in inflows, while Gold ETFs experienced significant outflows of approximately $2.2 billion. Meanwhile, Goldman Sachs has adjusted its economic outlook for 2025, raising its growth forecast for the fourth quarter to 1% and reducing the probability of a recession to 35%.
JPMorgan noted a decline in U.S. productivity in the first quarter, which contributed to a 0.3% decrease in GDP. Despite this, compensation per hour increased, leading to a surge in unit labor costs. Evercore ISI highlighted the resilience of the U.S. economy, with April payroll figures surpassing expectations and S&P 500 companies reporting solid earnings. However, trade policy uncertainties continue to affect the economic outlook, with potential price increases and withdrawn financial guidance from companies. Inflation concerns are rising, with the core PCE price index climbing at a 3.5% annualized rate in the first quarter.
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