Systematic Selling and Positioning Update

Equity positioning has rapidly deleveraged to neutral levels, but Bank of America warns that systematic strategies could trigger a $134 billion 'tsunami' of selling if the market continues to drop.

Key Takeaways

• 1.Systematic strategies face a massive asymmetric risk, potentially selling over $130bn in global equities if the market moves lower.
• 2.Hedge funds have significantly reduced their positioning, particularly within the Magnificent 7 (Mag7) stocks where both net and gross exposure fell.
• 3.Aggregate equity positioning has dropped to a neutral level (45th percentile) from being overweight at the start of the month.

Table of Contents

• Done & dusted?
• Fast market
• This has been a high vol tape
• Expect dispersion to continue
• Closer to prior extremes
• Cleaned up
• Meaningful Mag7 selling
• 13 year high in this short metric
• Lowest in 2 months
• Systematics 6 7
• Asymmetric
• Elevated on a 5-year horizon
• Tax refunds

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