Citi's Montagu Sees Increased Downside Risks as Nasdaq Longs 'Completely Offside'

September 27, 2022 7:43 AM EDT
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Chris Montagu, the Global Head of Quantitative Research at Citi, took note of rising bearish positioning across markets, however still falling short of reaching extreme net short levels.

Last week, the S&P 500 and other major U.S. indexes fell sharply in response to higher yields that continue to price in an extremely aggressive tightening by the Federal Reserve. Montagu noted that new short positioning is building up rapidly.

“A continuation of this could see a very one-sided skew develop,” the strategist warned clients in a note.

“Large positioning shifts are beginning to emerge across S&P 500 (- 0.6) futures as USD11.8bn in new shorts were added last week.”

Bearish positioning is less for Nasdaq futures (-0.4), although Montagu says the risk is clearly tilted to the downside.

“Nasdaq longs completely offside, and loss levels approaching 10%,” he added.

As far as Europe is concerned, similar trends are taking place with EuroStoxx currently the most extended (- 1.7), whereas FTSE 100 (+1.7) futures “remain the standalone market.”

“How sustainable these levels are given recent events remains to be seen,” Montagu concluded.

By Senad Karaahmetovic

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Citi, Standard & Poor's, Senad Karaahmetovic