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

This week likely marks the end of the positioning squaring phase, as multiple positioning gauges now signal that trades are no longer as extended as they were 2-3 weeks ago across various assets. This shift provides an opportunity to revisit our strategies and assess where macroeconomic trends might be steering global assets next, now that the worst of speculative activity has subsided.

As we all know, the CFTC report is always a week behind in updating markets on positioning, making last Friday’s report particularly interesting. It reveals the positioning squaring that occurred last Friday (NFP) and the following Monday when significant changes took place.

Short volatility, short JPY, and overly aggressive equity positioning have broadly normalized. While it appears that markets are rebuilding these trades—evidenced by the returns of the dispersion trade, USDJPY inching higher, and equities gaining momentum—it seems far healthier than what we observed during the spring.

Chart 1.a: The short volatility trade is squared