US-Europe equity positioning gap widens with bias towards Wall St, Citi says

Investing.com– Investor positioning in U.S. equities remained largely bullish as a rally on Wall Street showed little signs of stopping, while positioning on European stocks reflected a sustained bearish sentiment, Citi said in a note.

Investors continued to build long positions on U.S. stocks, with Wall Street’s benchmarks seeing extended bullish positions as well as the most profits among their global peers. 

“The US equity markets are now the top three most extended markets. However, the gradual build-up of positioning means that average profit levels are still modest,” Citi analysts wrote in a note. 

Wall Street indexes rose sharply in November after Donald Trump won the 2024 presidential elections, with investors positioning for more expansionary policies and tax breaks under Trump. 

Wall Street’s rally in recent sessions was also driven by sustained strength in heavyweight technology stocks, while expectations of a December rate cut kept stocks upbeat. 

On the other hand, positioning in European markets, especially in the Eurostoxx, remained net short, with a 100% of long positions in loss, Citi said. The gap in positioning between U.S. and European markets was also steadily widening. 

Citi noted that French political turmoil, which could see the collapse of the French government, was likely to do little to deter bearishness towards European markets. 

But the brokerage noted that some long positioning had picked up in Germany, while flows into the FTSE 100 also appeared to be moving towards neutral from bearish.