Deutsche Bank: After Two Weeks of Correction, Crowded Positioning in US Tech Stocks Has Largely Been Unwound
Taylor Wilson
Deutsche Bank data show big-tech positioning plunged from the 97th to the 48th percentile in two weeks, returning to neutral; yet money did not leave equities — it rotated out of tech into other sectors, where cyclical positioning remains near historic lows.
From "extremely crowded" to "neutral" — what actually happened?
Over two weeks the S&P 500 fell nearly 5%, but the Nasdaq 100 dropped 7% and the Mag 7 (Apple, Microsoft and the other mega-cap tech names) fell 10% — the pain was concentrated in big tech.
Meanwhile the S&P 500 equal-weight index, S&P 600 small-caps and Russell 2000 didn't follow — they moved toward record highs.
This means → the market didn't sell off broadly. Money spread out from the crowded tech trade, dragging positioning from the 97th percentile down to the 48th — right at the historical midpoint.
In plain terms = two weeks ago everyone was crammed on the same bus. Now half the passengers switched to other buses — no one left the road, they just spread out.
Why did fund flows move in the opposite direction of positioning?
In the most recent week, equity funds took in $31.5 billion — a two-month high. Within that, tech-sector funds attracted $12.3 billion during the sell-off, a record.
This means → falling positioning ≠ money leaving stocks. The actual move was redistributing a heavily concentrated tech bet across more sectors, not cashing out.
Discretionary investors (fund managers making judgment-based calls) dropped to the 25th percentile, a 15-month low. Systematic strategies (quant / trend-following) fell less, still near the 46th percentile.
How far has sentiment cooled?
The AAII bull-bear spread — the gap between retail bullishness and bearishness — fell to the 10th percentile, the most pessimistic reading in ten weeks and the fourth straight week in bearish territory.
Options markets cooled in tandem: the 5-day average put/call volume ratio dropped to the 41st percentile.
This reflects a market where short-term sentiment is already cold — and cold sentiment is often the fuel for the next bounce, because the pessimists have already sold.
Tech positioning is back to neutral — have other sectors caught up?
No. Cyclical sectors sit at the 11th percentile overall: financials at the 6th, materials at the 1st, industrial cyclicals at the 15th — almost nobody owns them.
Defensives are higher: real estate at the 89th percentile, utilities at the 58th.
In plain terms = big tech's "crowding" has been digested, but cyclicals' "emptiness" hasn't. If rotation continues, these sectors have room to take the baton.
With positioning back to neutral, how much lower is the fundamental bar?
Deutsche Bank notes that current positioning matches earnings growth in the "mid-teens" — close to the long-run trend rate of 11%.
This means → when big-tech earnings grew 44% in Q1, the 97th-percentile positioning demanded continuous beats. Now at neutral, the market no longer needs "beat every time" to hold steady.
This is the core structural shift after the adjustment: from "positioning outrunning fundamentals" to "positioning realigned with fundamentals."
What near-term disruptions are still in play?
FOMC meeting: Deutsche Bank sees higher-than-usual uncertainty, with potential policy-framework changes and the possible removal of forward guidance — either could spike rate volatility.
Equity issuance: concerns that a new wave of offerings could crowd out existing capital have not faded.
Iran headlines: geopolitical risk is skewed to the downside; if tensions ease, sectors and regions that lagged the April-May rebound could see further rotation.
China equity funds posted their 11th straight week of outflows at $2.1 billion, though the pace slowed. European equity funds lost $3.9 billion, under pressure for a second consecutive month.
Content is for reference only, not financial advice.