Retail investors rotated from stocks to bonds in February

1. PMI vs. stocks. "The start of a new cycle in PMIs (inverted in chart) propels a broader earnings backdrop which makes investors reconsider many stocks they've avoided or been underweighting for 3 years. The most institutionally-owned stocks tend to lag when macro begins to broaden."

2. Oil supply shocks. "Shocks can keep Oil prices elevated over the next three-months, but persistence beyond that depends on how markets reassess Fed policy (via inflation) and the underlying growth cycle ... oil shocks have generated clear risk-off trading conditions over a three-month horizon with traditionally defensive assets like Gold, USD, and relative US Equity outperformance."

3. DXY positioning. "The pain trade is likely higher for the USD due positioning becoming very short/underweight the USD".

4. AAII Asset Allocation. Retail investors rotated from stocks to bonds in February and pushed cash allocations down to the lowest since Nov'21.

5. Global breadth. "The percentage of global markets hitting new highs in February contracted and for the first time this year, fewer than 70% of global markets are above their 50-day averages (for context, all of this was prior to news of the outbreak of a new war in the Middle East) for the first time this year."

ICYMI