"neither institutional nor retail investors are currently underinvested in equities. In fact we find that the opposite appears to be true..."
-- JPMorgan's Nikolaos Panigirtzoglou
For much of 2019, when stock buybacks drove the bulk of market levitation, the recurring bullish refrain was that investors not only did not participate in the market upside, but had in fact redeemed the most money from equity funds since 2008...
. with some, such as JPMorgan's Marko Kolanovic claiming that as a result of this delayed response, it was only a matter of time before the "bulls on the sidelines" capitulated, and rushed to buy stocks, and as a result, Kolanovic told CNBC one month ago that "the S&P could soar to 3,000 as soon as May."
In retrospect, Kolanovic appears to have been overly optimistic once again, and just like last time when he predicted a ramp to 3,000 at the end of 2018, the smackdown to Kolanovic's excessive bullishness comes from none other than his own derivatives strategy colleague at JPMorgan, Nikolaos Panigirtzoglou, who in his latest Flows and Liquidity report, dismantled the core pillar of Marko's bullish thesis, finding that "neither institutional nor retail investors are currently underinvested in equities. In fact, we find that the opposite appears to be true."
Defying conventional analysis of flows, the "bad cop" JPM strategist, who has traditionally clashed with Kolanovic at key market inflection points, writes that "daily hedge fund indices have been diverging from the monthly ones and have been depicting a misleading picture in our opinion of the true equity exposure of hedge funds." Some more details:
In the US equity futures space, our preferred metric based on the futures positions by asset managers and leveraged funds... has risen back to the highs of last year. This suggests that asset managers and hedge funds are as long in US equity futures as they were at the market peaks of September or January 2018.
Similar to hedge funds, retail investors have also loaded up, and "have become significantly more overweight equities in tandem with the strong rise in equity prices this year, even as they refrained from buying equity funds." In other words, even though retail investors may have been selling stocks this year, market gains alone have pushed them more overweight. In fact, JPMorgan estimates that retail funds entered this month the most exposed since the end of the third quarter last year... just before the Q4 crash.
Stepping away from traditional investors, the JPM strategist claims that momentum traders such as CTAs have also been pretty long equities "as shown by the momentum signals of our trend following signal framework.... Figure 3 shows that both the short- and long-term momentum signals for the S&P500 futures contract stood at pretty high levels before this week’s correction, not far from last September’s levels. More importantly these momentum signals are now declining following this week’s correction and as explained in the next section these momentum signals have entered negative territory for non-US equity indices. Not only does this suggest that trend following investors, such as CTAs played a role in the week’s correction, but also that they pose downside risk for equity markets going forward if momentum signals decline further."
LOT MORE,,,,,,,,,,,,,,,,,
http://www.zerohedge.com/news/2019-05-13/market-plunge-comes-worst-possible-time-investors-jpmorgan-warns
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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