Deutsche Bank Sees Increase in Equity Positions Within the Tech Sector

Deutsche Bank reported a notable increase in equity positions within the technology sector. This trend reflects rising investment activities in large-cap growth (MCG) and technology stocks.

According to the bank's analysis, positions in this sector have sharply risen, while other sectors have maintained a more horizontal trajectory. The bank's overall measure of equity positions is high but not excessive, sitting in the 93rd percentile with a z-score of 0.80. Discretionary investor positions were volatile this week, with a z-score of 0.76, above average and in the 89th percentile.

Systematic strategies also showed an increase, with a z-score of 0.98, alongside a decrease in volatility for both equities and bonds. Specifically, bond volatility is at its lowest level since the end of 2021.

This shift in the technology sector is believed to forecast a modest increase in earnings, contrary to the gradual slowdown observed over the past three quarters. The optimism reflected in the positions of MCG and technology stocks indicates that investors are accounting for potential improvements in earnings.

Equity fund flows continued steadily, with $8.8 billion entering stocks. This figure was bolstered by a $13 billion increase in the U.S. and a $5.6 billion recovery in China, partially offset by outflows from other regions.

Bond inflows also rose to $10.5 billion, primarily directed toward investment-grade (IG) and broad-based funds. However, outflows from government and emerging market (EM) bond funds persisted.

Additionally, S&P 500 companies announced over $75 billion in stock buybacks this week. This marked a near-record announcement for weeks outside of earnings season. Deutsche Bank predicts that gross buybacks next year will rise alongside earnings, reaching approximately $1.3 trillion.