Equity inflows have surged to three-month highs in June as global markets reached new peaks, driven predominantly by the United States. This contrasts with earlier months in the year, where investment in equities outside the US, especially in Europe, lagged behind. The concentration and crowding around US markets and technology sectors have intensified as a result.
Goldman Sachs strategists highlighted insights from the NAAIM survey, indicating that active manager equity positioning in June was volatile, initially pulling back before rebounding to previous highs. They also referenced CFTC data showing that asset manager equity futures positioning remains near its peak levels.
Investor sentiment, as reflected in the AAII survey, remains stable and close to bullish levels, although it has moderated slightly from the euphoric highs seen in March. Meanwhile, the fear and greed indicator has shifted from the greed zone to more neutral levels over the past month.
Retail investors continue to show strong interest in equities, with consistent additions to their portfolios. While call option buying increased slightly last month, it remains below the highs observed earlier in the year, particularly in March. Traditional retail ETF flows have been positive recently, driven by a fear of missing out (FOMO) mentality that continues to drive retail investors to chase the market.
“Steady inflows and equity markets at highs mean US household balance sheets are heavily weighted towards equities more than ever,” noted Goldman Sachs strategists in a recent analysis. They highlighted that US household equity holdings as a share of financial assets have rebounded to record-high levels year-to-date.
Similarly, households in the European Union and the UK also hold equity exposures at two-decade highs, although they have not yet reached the levels seen during the dot-com era.
In terms of institutional investors, hedge funds and risk control funds have increased their equity exposure, whereas CTAs (Commodity Trading Advisors) and risk parity funds have slightly reduced their risk exposure, though they maintain elevated levels overall. These dynamics underscore the current investor appetite for equities amidst global market optimism and the ongoing management of risk exposure across different investment strategies.