Hi everyone, and welcome to this month’s update to our read of investor positioning and sentiment for the month ended April 30th. I’m Tim Graf, head of macro strategy for Europe at State Street Markets and host of our weekly podcast Street Signals, and I have the pleasure of walking you through the message given by the changes in our indicators of institutional investor flow and positioning during what has been a very volatile month for markets.

But actually, for all the news that tariffs and the market reaction to them generated in April, you would be forgiven for wondering what actually changed. Global equity markets actually finished the month flat, with the S&P 500 clawing back nearly all of what was at one point a 15% intra-month drop. The catalyst for that weakness was of course the widely watched Liberation Day tariffs announced by US President Donald Trump on April 2nd and the recovery came in part thanks to a delay to the reciprocal elements of those tariffs announced a week later, as well as hopes that the broader suite of tariffs would be mitigated by eventual trade agreements between the US and its largest trade partners.

For their part institutions did not overreact to the news flow. In fact, after last month’s slightly risk averse message from our broadest measures of sentiment, the aggregate tilt of risky asset flows this month was neutral. And in fact, the aggregate positions of institutions are also neutral – we see as many overweights relative to benchmark in risky assets as we see underweights. As the title of this month’s presentation suggests, markets have taken a very volatile round trip only for institutions to wind up with neutral aggregate risk positions, as well as a neutral risk stance within their most recent flows.

But let’s take a closer look at some aspects of behaviour to see what institutions have done across and within asset classes. At the highest level of positioning, looking across weights to stock, bonds and cash, it is probably not too surprising that the aggregate portfolio weight to equities did drop in April, as has been doing for most of this year. And that weight to equities is still above its long run average as the left-hand chart on this slide shows.

More surprisingly, the weight to cash and money market securities also dropped this month. You typically see allocations to cash rise in periods of extreme volatility but this time around, investors used up some of their dry powder. And, if money is leaving equities and cash, it is going into fixed income and, indeed, the monthly rise in investor allocations to bonds in April was one of the largest in the last two and a half years.

This continues then to be an episode that is more about rotation rather than outright risk aversion. But actually that rotation that we have already seen in regional equity markets, out of the US into Europe and elsewhere, that took a pause this month. Institutions have still lowered their weight to US equities year to date, but as we can see from both charts on this slide, they have hardly abandoned ship. In fact, foreign investor flows into US equities has picked up in recent weeks, somewhat challenging the notion of a sell America trade, a commonly discussed narrative in financial media.

The buying of European equities did slow this month and aggregate holdings are still around neutral. Positions in EM equities given a hint as to where further rotation of assets might head. EM equity positions are still heavily underweight, particularly as we can see on the right, in China, Korea and Taiwan.

Currency flows are perhaps one of the areas we can most clearly see a move away from the US. Selling of the US dollar continues and, for the first time in more than three years institutions are running a net dollar underweight. Critically, these outflows from the dollar so far are dominated by domestics hedging less of their foreign asset exposure back to dollars. Foreign holdings of dollars have not really budged for months, but represent a potentially significant source of USD selling to come if they decide to hedge away the FX risk embedded into the holdings of US assets.

So far, the euro has been a key beneficiary of dollar selling, investors continue to buy and much like we have a newly minted dollar underweight, we now see the first euro overweight across portfolios in years, one which looks likely to grow given strong current period buying.

To close, the message this month is one of balance – institutions are certainly not buying the dip but nor are they panicking. Flows into cyclically sensitive equities remain healthy relative to more defensive counterparts, higher yielding sovereign and corporate bonds are finding favour, as are higher yielding and Emerging market currencies. And the dollar, as I mentioned is still a risk-positive outflow.

This offsets some of the negativity we see in investors tendency to sell EM equities, to move away from high beta equity sectors and in to safer, higher dividend yielding stocks. They also aren’t really embracing riskier commodity currencies of EM sovereign bonds, preferring instead the safety of currencies like the Swiss franc and the Japanese yen.

All told, some mixed messages - I wish you good luck in the coming weeks as we pick through the pieces of the recent volatility and learn how investors continue to allocate around a much more uncertain environment.