U.S. stocks have surged since April, but market sentiment is not exuberant, and overall positions have remained "bearish"?

Despite the strong rebound of U.S. stocks since the low in April, the overall sentiment among investors may not have reached a state of euphoria.

According to Wind Trading Desk, JPMorgan analyst Nikolaos Panigirtzoglou and his team analyzed in their latest research report that the overall positioning in the market during this rally has been surprisingly cautious, even showing a "bearish" state, indicating that this rally is more driven by investors "chasing the market" rather than excessive optimism.

By calculating the market's different sensitivities to positive and negative economic news, JPMorgan found that since early May, when economic data exceeded expectations, the stock market's gains have outpaced the declines when data fell short of expectations, implying that investors are under-positioned and thus forced to chase higher prices when favorable news emerges.

It wasn't until late September that the market's reaction to news began to normalize. However, even so, various positioning proxy indicators from JPMorgan show that key participants, including hedge funds, speculative investors, and multi-asset funds, still have not reached high levels of stock exposure, with some groups remaining cautious.

The low positioning indicates that there is still a significant amount of "ammunition" in the market that has not been deployed; if market sentiment warms up, this capital could provide further upward momentum for the stock market. On the other hand, it also reflects investors' lingering doubts about chasing higher prices amid an uncertain economic outlook.

Key Indicators Show Overall Positioning is "Bearish"

The core argument of JPMorgan's report is based on a unique market sentiment indicator that measures investor positioning by analyzing the global stock market (represented by the MSCI AC World Index) in response to unexpected U.S. and Eurozone economic data.

The report notes that starting from early May this year, this indicator turned negative and reached a negative peak by the end of June.

The report explains that as the stock market rebounded strongly from the April low, investors found their positions to be "more bearish than they would have liked." Faced with unexpectedly resilient economic data, these under-positioned investors had to chase the market, further driving up stock prices.

It wasn't until late September that this indicator returned to neutral, indicating a balance between market positioning and macro fundamentals.

Multiple Indicators Show Investors' Positions are Cautious

Looking at the specific positions of different investor groups, cautious sentiment remains prevalent.

First, macro hedge funds' stock positions are still relatively low. According to JPMorgan citing data from Pivotal Path, preliminary data as of September shows that while the stock beta (a measure of sensitivity to the stock market) of macro hedge funds has rebounded in recent months, it remains in the "moderate negative" territory.

Second, speculative investors' positions are also not extreme. According to data from the U.S. Commodity Futures Trading Commission (CFTC), the net long positions of speculators (asset management companies and leveraged funds) in U.S. stock index futures have fallen back to near long-term median levels, well below the highs of the first quarters of 2024 and 2025 The report suggests that this indicates that speculators' stock exposure is not overly high, and there is theoretically room for an increase.

In addition, the short interest data for the SPY ETF also confirms the market's cautious sentiment. The data shows that the short equity ratio of the SPY ETF has only partially retreated, indicating that there remains a considerable degree of vigilance in the market.

Divergence in Performance of Balanced Funds and Risk Parity Funds

The behavior patterns of multi-asset investors also reflect the complex emotions in the market. An analysis of the stock beta coefficients of U.S. balanced mutual funds and risk parity funds shows that the stock beta coefficient of balanced funds has fallen below the average level in recent weeks.

The performance of risk parity funds has been more volatile. The stock beta coefficient of these funds dropped below the average level in early April, then rose above the average level from early August, but fell back below the average level again starting at the end of September. The report suggests that the decline in the stock beta coefficient in September may be partly related to the rise in implied volatility, which prompted funds to reduce their stock positions.

In contrast, momentum indicators for tracking investors such as CTA funds show that the Z-score for the S&P 500 and MSCI Emerging Markets Index is currently around 1.2, and for the Euro Stoxx 50 Index, it is about 0.8, still below the range of 1.5-2.0, which is typically seen as an "extreme" position level that could trigger mean reversion or profit-taking.