UBS Equities-Global Strategy _CTAs Positioning and Flows - Biweekly Upda...-108419032.pdf

ab28May2024GlobalResearchandEvidenceLabGlobalStrategyCTAs"PositioningandFlows-BiweeklyUpdateDetailsonthemethodology/modelcanbefoundinourQ-SeriesreportTimetolockinsomeprofits?•CTAs"equityexposureisbackatall-timehigh(96%letobeprecise).Inthepasttwoweeks,theymostlyboughtUSequitiesand(worthmentioning)theNifty50.RiskreductionislikelytobethemainthemeinJune,with~$20/25blnofprofittakingexpected.DowJonesandMexbollookparticularlyatriskofCTAs"sellingpressure.•NotmuchactionfromCTAsinthebondmarketinMay.Theyareshort,anddespitetheirreactionfunctionbeingsignificantlyskewedtowardsbuying,theyhavenotmovedyet.Now,a20bps+rallycouldquicklytriggersignificantunwinding($70mlnto$130mlnDv01potentialbuyingbasedonoursimulation).•CTAskeepharvestingcarryinCredit.Theyaremaxlongtheassetclass.•InFX,CTAshavecut~60%oftheirUSDollarlongpositionsinceourlastupdate.Theybought$70/80blnofG10currenciesand$20/25blnofEMcurrencies.OurmodelexpectsCTAs"flowstoremainnegativethedollarintheshortterm,sellinganother$40/50bln.Ifrealized,thiswillmakethemmoreorlessUSDneutralinaggregate.•Incommodities,CTAshaveseverelycuttheirbullishbetsinEnergy,leavingthemslightlylongtoday.Theyremainquitelongmetals,bothPreciousandIndustrials,andmoderatelyshortAgriculturals.WeexpectstabilizationinEnergy,andcontinuedriskreductionintheothercohortsinthecomingweeks.Currentsignals:bullishstocks/credit,bearishbonds,turningneutralUS$a)Equities:bullishacrosstheboardb)Bonds:bearishacrosstheboardc)Credit:bullishacrosstheboardd)Currencies:bullishZAR,MXN&CEEFX,neutralUS$,bearishAsiaFX&CADe)Commodities:bullishWheat,Cocoa&SoybeanMeal,bearishLeanHogs&GasolinePotentialtradesincoupleofchartsLevelstowatchonS&P500LevelstowatchonUST10yWhatourCTAmodelsaysaboutFX?WhatourCTAmodelsaysaboutEquities?WhatourCTAmodelsaysaboutRates?WhatourCTAmodelsaysaboutCredit?WhatourCTAmodelsaysaboutCommodities?Figure1:CTApricemomentumsignalsinmajormarkets:todayvsforecast-1.00-0.75-0.50-0.250.000.250.500.751.00US10YEU10YSPXSX5EMESA(EMEq)XIN9IEURMXNCNHCdxHYCrudeGoldSignal(t)Exp.Signal(t+2w)Signalvalue[-1,+1]Source:UBS,BloombergFigure2:Currentpositionsandexpectedflows(as%ofADV)inmajormarkets-20-15-10-50510152025US10YEU10YSPXSX5EMESA(EMEq)XIN9IEURMXNCNHCdxHYCrudeGoldPosition(t,%ADV)ExpectedFlows(t,t+2w,%ADV)(%ADV)CDXHY:+31%ADVXIN9I:+31%ADVSource:UBS,BloombergThisreporthasbeenpreparedbyUBSEuropeSE.ANALYSTCERTIFICATIONANDREQUIREDDISCLOSURES,includinginformationontheQuantitativeResearchReviewpublishedbyUBS,beginonpage30.GlobalMacroStrategyGlobalNicolasLeRouxStrategistnicolas.le-roux@ubs.com+33-14-8885000BhanuBawejaStrategistbhanu.baweja@ubs.com+44-20-75686833PaulWinterAnalystpaul-j.winter@ubs.com+61-2-93242080JamesMalcolmStrategistjames.malcolm@ubs.com+44-20-75688924ManikNarainStrategistmanik.narain@ubs.com+44-20-75683635MichaelClohertyStrategistmike.cloherty@ubs.com+1-203-7194281MatthewMish,CFAStrategistmatthew.mish@ubs.com+1-203-7191242GerryFowlerStrategistgerry.fowler@ubs.com+44-20-75675490JulienConzanoStrategistjulien.conzano@ubs.com+44-20-75672067MaxwellGrinacoff,C