Our consolidated measure of equity positioning has barely budged from last week’s lows and remains close to the bottom of the post-GFC range (7th percentile, z-score: -0.97) (Back To The Bottom Of The Post-GFC Range, Sep 30 2022). Discretionary investor positioning rose this week to the 18th percentile (z-score: -0.43), but systematic strategies cut positioning further (4th percentile, z-score: -1.78)
The equity market has also not budged from its focus on Fed tightening. The correlation between real rates and the S&P 500 over the last year has run at a record negative -0.91. It has historically cycled between +/- 85% and on average been slightly positive. With the Fed in turn focused on inflation, the market has also disconnected from its historically tight relationship with growth data surprises, which have been to the upside recently.
Discretionary investor positioning has risen slightly, still commensurate with a modest further decline in growth (ISM Manufacturing at 49).
- Deutsche Bank Strategy
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