Investing.com -- Asset managers overseeing more than $20 trillion in assets are paring back their exposure to U.S. exceptionalism trades, according to Citi’s latest quantitative global macro strategy report. The bank analyzed positioning and directional scores from 15 of the world’s largest asset allocators.
While equities remain broadly overweight, views on U.S. equities and small caps have been moderated. Managers have instead upgraded their outlook on international equities outside of China.
“We saw a reduction in U.S. exceptionalism positions with managers scrutinizing U.S. equities and improving their outlook on international equities,” Citi strategists led by Alex Saunders said in the report.
In fixed income, rates positioning was largely unchanged, though U.S. bonds were trimmed slightly. Overweight positions remain in European bonds and Gilts, while Japanese government bonds continue to be the consensus short.
On the credit side, high-yield sentiment worsened marginally, while positioning in investment-grade credit remained underweight for the U.S. and overweight for international exposure.
In commodities, base metals and energy saw upgrades, while gold remained a consensus long, albeit with reduced conviction. Foreign exchange (FX) market positioning also reflected some pullback in U.S. exposure.
“USD longs were reduced but remain consensus, while EUR/GBP/JPY saw upgrades,” Citi highlights.
Consensus views still show net longs in U.S. equities, small caps, the U.S. dollar, and gold, but the scale and intensity of those positions have eased.
The rotation away from the U.S. comes as U.S. economic outperformance is being reassessed amid uncertainty around upcoming tariffs and signs of slowing growth.
February saw U.S. equities and credit underperform relative to global peers, while commodities, particularly base and precious metals, delivered strong returns.
“There is a lot of disagreement across asset classes given the heightened uncertainty around the effects of upcoming tariffs. Broadly, managers remain overweight equities and more recently bonds as a tariff hedge,” Saunders said.