Hello everyone, and welcome back to our weekly positioning watch. 

Our newly invented high-frequency hedge fund positioning data was well received, and we’re working on expanding it to more assets on a running basis.

It’s worth revisiting the points we raised about concentration in broader equity indices. The 3-month rolling correlation between SPX and SPW (the equal-weighted equivalent) remains at dot-com levels. We’re reaching a point where the heavily weighted US indices no longer accurately represent the US equity market as a whole. There’s nothing inherently wrong with the largest 5-10 companies in the S&P 500 accounting for 25-30% of the total index, especially considering a key difference between the 2000-2002 period and now: tech companies actually earn money now.

However, this concentration does have implications for positioning trends and market narratives. The outperformance of tech will continue to make positioning in US equities relatively more crowded than in other regions until the trend changes. The US supremacy story is not about PMs favoring broad US equities over European equities, for example, but rather about favoring US tech versus broad equities in other regions.

Chart 1: Dot-com like correlation, but does it matter?