Institutional Insights: Deutsche Bank - Investor Flows & Positioning 09/06/25

Equity positioning has slightly increased this week but remains underweight (-0.4 standard deviations, 26th percentile). Despite numerous catalysts over the past two weeks, discretionary investors have stayed near neutral (-0.14 standard deviations, 36th percentile), as highlighted in "Stuck In The Middle" (May 30, 2025). This neutrality has led to compressed ranges in the S&P 500 both within and across trading days, accompanied by a gradual decline in volatility.

As volatility continues to drop, systematic strategies have incrementally increased their exposure, with significant room for further expansion given their current underweight status (-0.49 standard deviations, 24th percentile). For Vol Control funds, declining equity volatility directly translates to higher exposure, while CTAs are likely to increase equity longs as trend signals grow increasingly favorable.

This marks the shortest recovery from a volatility shock on record—defined as a volatility spike exceeding 1.5 standard deviations. Historically, such shocks took around two months for equities to bottom and an additional four to five months to recover, resulting in a total roundtrip of six to seven months. However, in this instance, the initial tariff-related shock dissipated rapidly, enabling equities to recover in less than two months and climb 4% higher. At this stage of past volatility shocks, the S&P 500 was typically still down by nearly 10%.