Goldman Sachs says investors are adopting more defensive positioning. Weaker risk appetite, declining net leverage among hedge funds, and capital rotating out of momentum and cyclicals into safe-haven assets are all driving this shift.
A team led by Christian Mueller-Gritschnauer notes that as bond inflows rise, safe-haven positions increase, and equity flows rotate into defensive sectors, Goldman Sachs sentiment and positioning metrics have fallen to the 46th percentile—the lowest level since 4.
Quantitative investors, such as commodity trading advisors and risk parity funds, continue to maintain underweight positions in risk assets.
The team stated that momentum ETFs saw an estimated net outflow of $1 billion in 9, marking one of the largest single-month withdrawals in recent years, while leveraged tech ETFs continued to shrink.
Capital inflows favored the Telecom, Utilities, and Infrastructure sectors, while the Financial and Industrial sectors saw the largest outflows.
However, the team noted that volatility divergence across asset classes is pronounced: bond volatility surged significantly more than stock volatility. For funds focused on either the U.S. or Western European markets, bond fund flows exceeded equity fund flows in scale.
The report states that positions in traditional safe-haven assets, such as gold and the Japanese yen, have also increased.
