Investing.com — U.S. equity market dominance remains intact for now, but Barclays said cracks are beginning to appear, with crowded dollar positioning, AI wobbles and falling oil prices beginning to revive investor interest in European markets.
Analyst Emmanuel Cau told clients in a note on Wednesday that U.S. equities saw their biggest inflows on record in June at approximately $150 billion, while rest-of-world markets “remained largely for sale.”
Dollar debasement concerns have faded amid strong growth and easing concerns over Federal Reserve independence, pushing USD positioning back to its highest levels since “Liberation Day” last year.
However, Barclays warned that U.S. versus rest-of-world equity flows “look extended (>+1SD) vs. history,” suggesting some reversal may be due.
Despite the U.S. dominance, Barclays said hedge fund and CTA positioning in Europe has started to improve, driven by lower oil prices and AI diversification.
European flows are said to remain negative overall, while bearishness on U.K. domestic assets remains high.
On broader positioning, Cau noted that hedge fund and CTA de-grossing in June was offset by record long-only fund inflows of approximately $180 billion, keeping aggregate equity positioning near highs as “FOMO still very much prevails.”
Barclays flagged Fed uncertainty under new chair Kevin Warsh as a key risk, noting that hawkishness has pushed up real rates and tightened financial conditions.
With summer seasonality and buyback blackouts adding to volatility risks, Cau said that “resilient EPS momentum continues to provide a key backstop to equities.”