S&P 500 positioning is ‘completely one-sided’ as bears give up and bullish sentiment soars, Citi says

The Charging Bull, or Wall Street Bull, is an icon of the stock market in Manhattan.

Bullish stock positioning is at records as the bears throw in the towel and optimism fuels a record-setting rally in US stocks.

Citi strategists said the S&P 500’s positioning is “completely one-sided,” hitting news records as the bears give up. That refers to the percentage of investors who are “long” the S&P 500, or betting that the market will continue to rise versus those taking the opposite view.

“S&P positioning is setting new highs for a fourth consecutive week and increasingly the hold-out shorts are capitulating,” the analysts, led by Chris Montagu, wrote in a Monday note.

As a result, US indexes are the most extended among major stock averages covered in the analysts’ report — and that’s made life tough for the remaining bears, the analysts said.

“The three US markets are now the most extended bullish in the report as well as carrying the most profits. As we stated last week, contrarians are not being rewarded,” they wrote.

The analysis comes as investor sentiment has soared this year amid a continued market rally, with the S&P 500 up 28% year-to-date.

The market’s bull run gained steam last month after Donald Trump’s election win fueled hopes of stronger business activity and earnings growth under his proposed corporate tax cuts and lighter regulatory touch.

Investors’ preference for US stocks over international equities has accelerated the rally, and made for a broadening of the gap between net positioning in US versus European markets, the analysts said.

S&P 500 longs are “a stark contrast to positioning in Eurostoxx which has been net short for several weeks and 100% of longs are in loss,” the analysts said. “The gap in positioning between the regions is only widening.”

Investors have been bearish on European stocks for the last few weeks. Citi said that sentiment is likely to remain unchanged as French politics threaten to further roil the market.