S&P 500 positioning levels at record highs, pullback risks rise, Citi warns

Positioning in the S&P 500 surged back to record highs in recent weeks on improved risk appetite, Citi analysts said in a recent note, although stretched bullish positions made stocks vulnerable to a turn in sentiment.

Citi said positioning for the S&P 500 was solely one-sided, with long notional positions at well over $100 billion. This came as Wall Street extended a risk-on rally in the wake of Donald Trump’s victory in the 2024 presidential election. 

But Citi warned that an excess of long positions made the risk of a pullback more acute.

“Risks are more acute for the S&P due to the large asymmetric positioning setup, Nasdaq and Russell short positioning levels remains near long-term averages, and overall profit/loss levels haven’t materially developed,” Citi analysts wrote in a note. 

Wall Street surged to record highs through November after Trump’s election victory, with positive economic data from last week adding to the gains.

Citi noted that while the economic data presented a positive picture of the economy, the brokerage said investors were still in a “waiting mode” to see what policies the Trump administration will bring. 

Wall Street cheered Trump’s nomination of season investor Scott Bessent as Treasury Secretary, with the Dow Jones Industrial Average surging to record highs this week. 

But sentiment sharply turned after Trump threatened on Monday evening to impose more trade tariffs on China, Canada, and Mexico.

Source: Investing.com