JPMorgan analysts expect a near-term tailwind for equity markets as macro hedge funds begin rebuilding equity exposure after a sharp reduction in risk during March’s market volatility’s according to a report by Investing.com.
The report cites JPMorgan strategist Nikolaos Panigirtzoglou as writing in a client note that macro funds significantly reduced their equity exposure last month, leaving them under-positioned for any subsequent recovery in risk assets.
He argued that this positioning gap could force systematic and discretionary macro managers to re-engage with equities in the coming weeks, potentially amplifying upside momentum in markets, particularly if geopolitical tensions show signs of easing.
According to
the note, large-cap US technology stocks may be among the primary beneficiaries of renewed positioning, supported by elevated short interest in technology-heavy ETFs such as the QQQ, which could fuel additional short covering if sentiment improves.
JPMorgan also highlighted that sector flows in recent weeks were heavily defensive, with technology and communications stocks experiencing outflows during March and early April, while inflows were largely concentrated in more defensive or cyclical areas such as energy, industrials and utilities.
Beyond positioning, the bank pointed to broader signs of strain in market liquidity. It noted that trading conditions in US, European and Japanese equities have deteriorated to levels last seen during earlier periods of acute volatility, while liquidity in crude oil futures has weakened significantly, with Brent and WTI markets dropping to multi-year lows. Gold futures liquidity, meanwhile, remains subdued following a sharp selloff earlier in the year.
