2 days ago
Citi highlights sector opportunities based on recent flows
-- Citi analysts released a "flash update' note based on equity sector flows, highlighting shifting preferences among institutional investors.
According to their analysis, long-only managers were net buyers in the last week, primarily acquiring Tech and Consumer Discretionary stocks while divesting from Consumer Staples.
The bank added that hedge funds also exhibited net buying activity, increasing exposure to Consumer Discretionary and Consumer Staples but selling Materials, Energy, and Communications.
Based on the recent flows, Citi's model is said to favor Real Estate, Communications, and Consumer Discretionary over "Health Care, Financials, and Consumer Staples.
'Long-only managers were sellers in the past two months, selling Health Care, Financials, Consumer Staples, while buying Real Estate, Communications, and Consumer Discretionary,' said Citi.
Meanwhile, a broader view of the past month is said to show both long-only and hedge fund managers as overall net sellers, reducing exposure in Financials, Health Care, and Tech but increasing positions in Communications, Industrials, and Materials.
Citi's "market-implied regime analysis using our macro-clustering framework suggests that market internals most closely resemble the tech-friendly 'Goldilocks' regime as Tech has continued to outperform."
This "Goldilocks" regime is said to indicate a period of stable growth and contained inflation, which is generally favorable for technology stocks.
The analysts further explain that "AI trade is making a comeback with the Trump administration's decision to rescind the Framework for Artificial Intelligence Diffusion, supporting Tech sector strength."
Citi's framework also shows that relative sector returns over the last month "continue to most closely resemble what is typical in the tech-friendly 'Goldilocks' regime," while the "Tightening Financial Conditions' regime remains the least correlated."
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