Flow shift favours Europe, but global positioning stretched
SPY•Europe sees signs of improving inflows
Europe, meanwhile, is benefiting from less U.S.-centric flows and a rotation away from crowded Tech and AI trades, helped by improving market breadth and Value's outperformance.
"In Europe, nascent signs of pick-up in inflows are visible, especially from US investors," they say.
Barclays says Europe is benefiting from a flow shift
European equities are not in a bad spot, but stretched positioning leaves investors with less protection against potential shocks, Barclays says.
Global equity inflows stand at a record $659 billion, while strong earnings continue to support equities over bonds. But the UK bank says tighter financial conditions, rising rate expectations and seasonal factors argue for caution.
"Tactical hedging seems wise given current limited positioning cushion," strategists led by Emmanuel Cau write.
Inflation, Fed expectations and real yields are a concern
They note investors remain relatively relaxed on inflation despite growing risks from higher oil prices, while Fed rate expectations and real yields have moved higher.
"Financial conditions continue to tighten, with Fed rate hike expectations moving higher and US real yields approaching levels that have historically become a headwind for equities."
