Hello everyone, and welcome back to our weekly positioning/sentiment overview!

Equity sentiment has soured a bit since we last spoke, with broad US traded ETF fund flows sent back into solid negative territory after a stunning start to the year. While most of it is due to the tax-season in April, the hawkish repricing of global central banks has also played its part in normalizing the über-bullish sentiment in US equities, with markets now also biting their nails as an ECB June cut is no longer a certainty.

Chart 1: Rolling monthly US ETF fund flows

After a couple of weeks of outflows from XLE, the reflation bet is back on track with around 500 mn. USD in inflows, while industrials take a beating over the past week as the S&P PMI missed last week. 

With overall equity sentiment normalizing, now is the perfect time to shuffle up allocations as 0 Fed moves will likely be the outcome of 2024. Inflation up together with manufacturing up leaves a continued great outlook for energy, industrials, materials and financials, while there is still not much juice left in classical defensives like staples or health care. Tech continues to perform despite higher USD rates, and from a momentum perspective a tactical allocation towards the sector looks appropriate.

Chart 2: Weekly equity fund flows – Energy still popular

Despite vibes from institutional investors in Asia signaling a profound fear of placing funds in China, the volume invested in equities through the Shanghai / Hong Kong link in the Chinese direction has spiked over the past week, signaling a short-term revival of Chinese sentiment. 

Chart 3: Chinese sentiment is improving again