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

The overwhelming message we get from our positioning data is that (1) markets are still overwhelmingly long the USD, and (2) markets are still heavily short USD bonds while staying slightly long European fixed income, at least on a relative basis.

Markets have been unwilling to give up the “pro-tariff” trade, which admittedly was the right lean into the recent CPI report, although today’s PPI details revealed that most of the subcategories in the PPI that feed directly into the PCE are in outright deflationary territory.

Looking across markets, it’s clear that we have moved into an era where U.S. exceptionalism is not as obvious as it has been before, and we have seen both European financials up 20% YTD and most other equity indices around the globe up more than 8–9%, while the S&P 500 and Nasdaq are only up a couple of percent.

A lot of it, of course, boils down to the material volatility seen over the past couple of weeks, which, as we have written about tons of times before, has a direct correlation to the holdings of U.S. equities among asset managers.

Aside from that, the flows into U.S. equities are actually very strong compared to usual January and February patterns, and it’s hence interesting why U.S. equities have “only” delivered a couple of percent compared to the rest of the world—which, by the way, is the clear pattern we lean towards going forward (European outperformance vs. U.S.).

Chart 1a: AM S&P 500 positioning vs. realized volatility