Citigroup strategists have flagged rising exposure to the S&P 500 (^GSPC), noting that current levels have historically preceded a 10% market decline. According to a note from Chris Montagu’s team, long positions in futures tied to the benchmark index are at their highest since mid-2023, raising concerns of “extended” market positioning.
“We’re not advising investors to reduce exposure just yet, but positioning risks do increase when markets become stretched like this,” the strategists cautioned.
This warning comes after the S&P 500 dropped 10% from August to October last year, driven by fears that the Federal Reserve would maintain elevated interest rates to combat inflation. Tech stocks, in particular, led the broader market decline during that period.
However, investor sentiment is more positive now, with the Federal Reserve starting to cut rates while the economy remains robust. As a result, the S&P 500 is trading near record highs again.
Montagu also noted that profitable positions are less stretched compared to 2023, suggesting there’s less capital at risk, and investors may feel less pressure to reduce positions if the market experiences a pullback.
