Tech Stock Positioning Nears Neutral as Investor Rotation Enters Final Phase, Deutsche Bank Says

Investor positioning in large-cap technology stocks has fallen sharply from previously elevated levels and is now close to neutral, signaling that the ongoing rotation away from the sector is largely complete, according to Deutsche Bank strategists.

A research team led by Parag Thatte said the shift out of large-cap technology appears to be about 75% complete, reflecting a significant change in investor sentiment after an extended period of strong positioning in the sector.

The report noted that overall equity positioning declined during the past week as both discretionary and systematic investors reduced exposure. Discretionary investors made the largest adjustments, with positioning falling below neutral levels, indicating a more cautious stance toward equities.

Systematic investment strategies also trimmed their stock exposure but continued to maintain overweight positions overall. Among these, volatility control funds reduced equity allocations while remaining above neutral, suggesting that automated strategies are still relatively constructive on the broader market despite recent adjustments.

Commodity Trading Advisors (CTAs) also lowered their equity holdings slightly, although their positioning remains in the upper end of its historical range. This indicates that trend-following strategies continue to favor equities even as they moderate exposure.

Fund flow data highlighted mixed investor activity across asset classes. Global equity funds attracted $30.4 billion in net inflows during the week, supported primarily by strong demand in Asia, where investors added $21.3 billion. In contrast, U.S. equity funds recorded net outflows of $7.2 billion, reflecting weaker investor appetite for domestic stocks.

Fixed-income markets continued to see positive inflows, with bond funds attracting $14.9 billion. However, Deutsche Bank noted that this represented the weakest weekly inflow into bond funds in the past three months, suggesting demand for fixed income may be easing.

Meanwhile, money market funds experienced net outflows of $33.9 billion for the second consecutive week, indicating that some investors are moving cash into other asset classes despite the broader reduction in equity exposure.

The latest positioning and fund flow trends suggest investors are rebalancing portfolios while maintaining selective exposure to equities, with the rotation out of large-cap technology stocks approaching its final stages.