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Investing.com -- UBS provided insights into the recent strategic shifts by Commodity Trading Advisors (CTAs) in response to market volatility influenced by tariff concerns.
According to UBS, CTAs have significantly reduced their equity exposure in recent weeks, moving from a neutral stance to the cusp of a net short position. This shift comes as a strategy to navigate the tariff-induced market turbulence.
UBS anticipates that unless equity prices see a rebound of at least 5%, CTAs are poised to engage in substantial selling, with a potential $40 to $50 billion worth of equities to be offloaded over the forthcoming two weeks.
In contrast to their equity strategy, CTAs are now favoring bonds, with a bullish turn expected this month. This renewed interest in bonds marks a notable change in strategy for CTAs.
The foreign exchange (FX) market has seen minimal activity from CTAs in the past two weeks, with a slight increase in buying of G10 currencies against a minor sell-off in emerging market (EM) currencies. UBS forecasts that CTAs will resume FX trading in April, beginning with a sell-off of the US dollar.
The Japanese yen, British pound, Swiss franc, and Chinese yuan are predicted to benefit from these moves, at least in the short term.
Finally, in the commodities sector, CTAs are expected to sell across all four cohorts, including precious metals. Despite maintaining a maximum long position in gold, CTAs are likely to sell significant amounts of silver and platinum.
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