US stock positioning slips; some investors see big pullback: RBC

Investing.com -- US equity futures positioning has slightly declined after reaching record highs, according to RBC Capital Markets, citing CFTC futures data. This trend is reflected in key equity contracts such as the S&P 500 , Nasdaq 100 , and Russell 2000 .

S&P 500 futures positioning recently hit a new all-time high, surpassing previous peaks seen in late 2017 and early 2018, particularly in January 2018. That earlier peak followed a strong 19% annual gain in the S&P 500 in 2017, largely driven by enthusiasm over the December tax cut bill.

"The similarity in the data begs the question of whether US equities have already pre-traded some of the political tailwinds expected by many investors to be seen in 2025,” RBC strategists said in a note.

The latest CFTC data points to potential concerns for the equity market, adding to the case for a possible short-term pullback. This aligns with the bear case outlined in RBC’s recent S&P 500 outlook.

On the other hand, there is also a positive signal for the market, RBC notes. To be specific, consensus forecasts for 2025 real GDP have risen to 2.1%, driven by stronger expectations for first-quarter economic growth.

"The move higher in consensus GDP forecasts has been driven by upgrades to consensus 1Q25 real GDP views, which speaks to the idea that political tailwinds from the unlocking of business activity are expected to show up in data to start the year,” strategists continued.

But this data, which is positive for equities, has been offset partly by an uptick in consensus projections for Fed Funds and 10-year Treasury yields . These increases weigh negatively on stock market valuations, as higher rates tend to pressure trailing price-to-earnings (P/E) multiples for the S&P 500.

RBC’s analysis suggests that while GDP growth forecasts in the 2.1-3% range are supportive of stronger stock market returns, growth in the 1.1-2% range is associated with weaker performance.

Source: Investing.com