US inventory positioning slips; some traders see large pullback: RBC

Investing.com — US fairness futures positioning has barely declined after reaching document highs, based on RBC Capital Markets, citing CFTC futures knowledge. This pattern is mirrored in key fairness contracts such because the S&P 500, Nasdaq 100, and Russell 2000.

S&P 500 futures positioning lately hit a brand new all-time excessive, surpassing earlier peaks seen in late 2017 and early 2018, significantly in January 2018. That earlier peak adopted a robust 19% annual acquire within the S&P 500 in 2017, largely pushed by enthusiasm over the December tax reduce invoice.

“The similarity within the knowledge begs the query of whether or not US equities have already pre-traded a few of the political tailwinds anticipated by many traders to be seen in 2025,” RBC strategists mentioned in a notice.

The most recent CFTC knowledge factors to potential issues for the fairness market, including to the case for a doable short-term pullback. This aligns with the bear case outlined in RBC’s latest S&P 500 outlook.

However, there’s additionally a optimistic sign for the market, RBC notes. To be particular, consensus forecasts for 2025 actual GDP have risen to 2.1%, pushed by stronger expectations for first-quarter financial progress.

“The transfer increased in consensus GDP forecasts has been pushed by upgrades to consensus 1Q25 actual GDP views, which speaks to the concept that political tailwinds from the unlocking of enterprise exercise are anticipated to indicate up in knowledge to begin the yr,” strategists continued.

However this knowledge, which is optimistic for equities, has been offset partly by an uptick in consensus projections for Fed Funds and 10-year Treasury yields. These will increase weigh negatively on inventory market valuations, as increased charges are inclined to stress trailing price-to-earnings (P/E) multiples for the S&P 500.

RBC’s evaluation means that whereas GDP progress forecasts within the 2.1-3% vary are supportive of stronger inventory market returns, progress within the 1.1-2% vary is related to weaker efficiency.