Retail Investors Bought 3.5B$ of S&P 500 Last Week

S&P 500:

This week, as the S&P 500 reached all-time highs, hedge funds, asset managers, and retail investors were net buyers of S&P 500 exposure, with total purchases amounting to $7.52 billion. Year-on-year, asset managers and retail investors have increased their S&P 500 exposure by $130 billion. Notably, hedge funds have begun to capitulate and cover their short positions, purchasing $13 billion worth of S&P 500 exposure over the last 3 months.

An analysis of net positioning reveals that hedge funds remain net short on the S&P 500. However, their short positions are smaller than the 12-month average, and their percentile positioning is trending higher. In contrast, both retail investors and asset managers are displaying strong optimism, with positioning in the 71st and 98th percentiles, respectively. Overall, market sentiment appears to be heavily skewed to the upside. We believe this could lead to a sell-off if positioning mean reverts to the downside from these extreme levels.

USDJPY:

Investors are displaying a bearish outlook on USD/JPY following the recent unexpected rate hike by the Bank of Japan, which triggered a spike in the VIX to 60. Net positioning has fallen below 28% percentile, with all investor categories holding net short positions.

Additionally, this week, asset managers and hedge funds have started increasing their long exposure to USD/JPY, after having reduced their positions by 96,000 contracts over the past year. We believe this extreme bearish positioning could mean revert higher, potentially driving USD/JPY price higher.

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