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

We have been looking at the explosive increase in US equity positioning for a while, as multiple indicators show that equities are reaching stretched points positioning-wise — CFTC positioning among asset managers skyrocketing, our own data showing increased positioning in US vs. the rest of the world, and surveys starting to indicate that everyone is expecting equities to crawl higher.

However, while there is much merit to the view that equity positioning is getting stretched across various metrics, some of the charts making the rounds at the moment are not moving for the reasons people think.

The first point I want to highlight is the fact that a number of people have shared this chart over the past couple of weeks, showing that an unseen amount of households see stocks rising going forward. At first glance, this looks like a very significant change in “positioning,” but there might be a couple of reasons why we are seeing this now.

Firstly, consumer confidence and equity returns are normally very closely correlated (which makes sense), but we have seen a growing divergence between equity returns and the moves in consumer confidence — equities have moved higher while consumer confidence has stayed sideways for most of 2024. Some of the explanation lies in the fact that equity returns have surprised the general perception of the economy.

Secondly, this survey is known to be heavily skewed by political outcomes — i.e., it increases among Republicans when there is a Republican president, and vice versa.

So while the increase is significant, the real “positioning” effect is likely much lower than what we are seeing here — but positioning is still starting to become stretched (more on that right below).

Chart 1.a: Households have turned VERY bullish on equities, but there are mechanical reasons for it