Wall Street collectively bullish on US stocks: institutional short positions near five-year highs, conditions for year-end rebound gradually maturing.
Tapbit news, November 5 — After the U.S. midterm elections concluded, Wall Street institutions including JPMorgan, Nomura, HSBC, and Citadel Securities have successively signaled a bullish outlook on U.S. equities. Institutions generally believe that large-scale deleveraging before the election, short positions near five-year highs, combined with sustained retail buying, resumption of corporate buybacks, and significant compression in tech stock valuations, have created conditions for a year-end rally in U.S. stocks.Citadel Securities data shows that systematic trend-following strategies (CTA) currently hold net long positions in U.S. equities at the lowest level since 2018, while retail investors have net bought U.S. equity cash products for 22 consecutive trading days since October 5, with cumulative purchases of nearly $33 billion. Additionally, the proportion of S&P 500 constituent stocks' market cap eligible for share buybacks continues to recover, expected to reach 85% by November 9.Tech stock valuations have also seen significant compression. The Nasdaq 100 index's price-to-earnings ratio has fallen to 19.1x, the lowest since October 2022; the S&P 500 semiconductor constituents' P/E ratio has dropped to 13.8x, down 45% from its peak earlier this year. Meanwhile, forward earnings-per-share expectations for memory, AI infrastructure, and semiconductor sectors have been revised upward by 32%, 31%, and 30% respectively since late June, creating a divergence between upward earnings revisions and contracting valuations.JPMorgan maintains a tactically bullish stance, recommending a allocation strategy combining tech stocks with cyclical stocks. Scott Rubner of Citadel Securities believes that with the election concluded and market volatility declining, investors have ample room to rebuild risk exposure, and the path of least resistance for U.S. equities through year-end is upward.HSBC also views the Anthropic IPO as a key node for further reversal in tech stock sentiment, believing that a smooth listing could serve as an important catalyst for a comprehensive re-rating of tech stocks. Historical data shows that since 1938, the S&P 500 index has risen in 95% of years in the 12 months following U.S. midterm elections, with an average gain of approximately 14%.[Source]
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