Smart Money Is Rotating: Here’s Where to Follow It Next
Positioning data from recent reports is suggesting that institutional investors may be shifting their exposure. Crowded trades such as oil and gold are attracting less capital, whereas equities are gradually coming back into focus. Are these changes a response to recent market movements, or are investors reshaping their expectations?
The Commitment of Traders report (“CoT”) doesn’t make many headlines, but it should. Every week, the CFTC forces the largest players in futures markets—commercial dealers/market makers, asset/money managers, leveraged funds, and large independent traders or “whales”—to disclose their aggregate positions across commodities, stock indexes, and bonds. It’s the closest thing markets have to an X-ray of institutional conviction at large. Currently, we’re seeing something interesting: fresh capital is moving into the markets, and it isn’t going where most retail traders think it is. Institutional traders—“smart money” as they are called—are turning their backs on oil at these prices, sitting out gold despite the macro case for it, and moving back into U.S. equities. Most importantly, they are signaling risk is back on the menu.