Elevated equity positioning, leverage could challenge stocks in Q4: JPMorgan

Investing.com -- JPMorgan said in a note Thursday that excesses in equity positioning and leverage have returned, which could act as a headwind for stocks in the fourth quarter.

"Elevated equity positioning and leverage have re-emerged, albeit to a lesser extent than last June/July, posing some challenge to equities into Q4," strategist Nikolaos Panigirtzoglou wrote.

The bank had noted at the end of July that an earlier deleveraging phase had unwound most previous excesses. Two months on, it finds several of those measures have rebounded, “which could represent a headwind for equity markets into Q4.“

Leverage through U.S. equity futures is said to be back near its highs for the year. JPMorgan noted that its broader positioning indicator appears to have peaked in September, after reaching levels seen in January and in August 2025.

Furthermore, Panigirtzoglou said short interest in SPY is bottoming out after hitting a record low in early September. Short positions in semiconductor ETFs have also normalized, suggesting most short covering is complete, according to the strategist.

He added that momentum traders have begun rebuilding long positions in the Nasdaq, Kospi, Taiwan and Nikkei, though not to previous extremes. Assets in leveraged equity ETFs relative to underlying market value have risen in recent weeks.

JPMorgan flagged margin account leverage as the biggest vulnerability, saying it remained very elevated in August and barely changed through the summer deleveraging.

Even so, the bank believes the tech and AI complex still has fundamental support. It pointed to rising memory prices, higher capital spending forecasts for hyperscalers and holding AI computing prices.

Original Article

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