Insights

Institutional Investor Indicators: February 2026

The Risk Appetite Index returned to modestly positive territory in February, but equities edged lower as investors shifted slightly toward fixed income amid valuation and AI concerns. Cash was stable, equity exposure remained elevated, and dollar selling persisted.

March 2026

Our monthly video series offers an updated analysis of our institutional investor indicators.

Our Institutional Investor Holdings Indicator shows the aggregate holdings of institutional investors across three asset classes: stocks, bonds, and cash. This simple information can tell us a lot about how investors view the economy and markets.
Our Institutional Investor Risk Appetite Indicator is based on flows — buying and selling activity — rather than portfolio positions. It reveals whether investors, in aggregate, are buying risk or selling it. While the Holdings Indicator tells us about the current location, the Risk Appetite Indicator tells us about the direction of travel.

Institutional investor indicators february 2026

Financial markets have had a tough start to 2026, marked by range-bound equity markets, largely stable long-end yields, and central banks broadly on hold. Foreign exchange (FX) markets have been similarly moribund, with the United States dollar index (DXY USD) closing in February at pretty much where it started earlier this year.

That being the case, it is hardly a surprise that our Risk Appetite Index has spent recent months bouncing between neutral and slightly positive. Within the month, the asset allocation weight to equities, the riskiest class of assets, was virtually unchanged; while the same is true for allocations to cash and fixed income assets. However, an unchanged allocation to equities indicates that investors are still overweight risk as the prevailing portfolio share invested in equities is close to its highest level in 20 years.

These broad conclusions are backed by our wider suite of behavioral indicators. Our cross-asset Behavioral Risk Scorecard (BRS) shows sentiment as largely positive, albeit with occasional dips into neutral or slightly negative territory in recent weeks. At the same time, the BRS also shows that overweight positioning in risky assets is now close to its most extended since 2018. Real-money investors are happy to remain overweight risk but, more recently, are reluctant to add significantly to these positions.

While the overall allocation to equities remained largely unchanged in the month, there has been considerable rotation within sectors. As the market has increasingly focused on the potential winners and losers from artificial intelligence (AI), the most notable shift has been a sharp move out of software stocks, where positioning is now at its largest underweight since the dot-com crash. We have also seen a move out of semi-conductor stocks in favor of a move to tech hardware. This is not a generalized move out of technology-related equities, but rather a rotation within technology-related stocks. In terms of positioning, the overweight in US stocks persists, although it is now more extended in Japan than in the US. Real-money investors remain underweight in equities for emerging markets.

Appetite for fixed income assets, while largely unchanged in the month, remains tepid. This is particularly true for the US where investors were underweight US Treasuries (UST) and continued to sell in February. Positioning in USTs has only been more underweight than current levels in 5 percent of the time over the last five years.

As with Treasuries, institutional investors continue to shun the US dollar, despite existing heavily underweight positioning. Holdings of the US dollar remain close to their pronounced underweight since 2021. In relative terms, the US dollar underweight is easily the most significant of all the major currencies. The announcement that Kevin Warsh has been picked to lead the Federal Reserve from June onwards has done little to change expectations that the Fed will cut rates more aggressively than all other G10 central banks in 2026, reinforcing the negative dollar sentiment. In contrast, strong buying of the euro has persisted despite an existing overweight. However, we did see some unwinding of overweight Australian dollar positions in February in the face of an extended Australian dollar overweight. Positioning in the Japanese yen remains underweight.

View February commentary from Lee Ferridge, head of Macro Strategy in the Americas, State Street Markets.

View the transcript

Hello, everyone, and welcome to this month's update to our read of InvestorFlow and positioning for the month of February.

My name is Lee Ferridge. I'm the Head of Macro Strategy for the Americas at State Street Markets, and I have the pleasure this month of walking you through the message given by changes in our indicators of institutional investor flow and positioning.

As you can see in our first chart. This month our risk appetite index has returned to positive territory.

This continues the pattern we've seen recently of positives interspersed with neutral readings. And this really reflects what we're seeing in the markets of late. 2026, we've seen largely sideways markets.

And this has also been reflected in our measure of investor sentiment, the behavioral risk scorecard.

As you can see, largely positive. But then we have these periods of negative sentiment readings.

What, you also see is the light blue line on this chart, which is a measure of risk.

How are institutional investors positioned in risky assets? And what you'll see is over the last few months, this measure of holdings has increased meaningfully. In actual fact, if we look at a three-month moving average.

of this holdings measure. It is now at its highest level since January 2018. And what that means is that institutional investors are positioned overweight risky assets which.

Should there be a market shock could mean we get an overreaction in prices because of this already overweight positioning.

We see a similar picture when we look at our asset allocation asset class weight series here on the left you'll see the allocation in our institutional investor framework of stocks, bonds, and cash.

The allocation to stocks has been overweight for about 3 years, but that overweight has grown recently. In actual fact, if you look at the chart on the right hand side, what you can see is the allocation to equities over and above that to fixed income.

Recently reached its highest level since 2007. Obviously, with the strong rally in equities we've seen in recent years, it's understandable that investors are overweight relative to fixed income, but still something of note, and something we should think about going forward now that equity prices.

have become a little less certain than they were previously.

If we shift to fixed income markets, what you can see is we see a big underweight in US Treasuries. So here we see sovereign bond holdings across the world. The biggest overweight in fixed income is actually found in Japan.

closely followed by Norway and Australia, with the big underweights in the UK, France, and, as I mentioned before, the US.

This underweight in US Treasuries is also reflected in what we see in the dollar. So our measure of holdings in the dollar, i.e. Institutional investor positioning, shows an underweight that is close to its most extreme.

Since 2021. Looking at the chart on the right-hand side, we can see how real money investors are positioned across the G10 space. The dollar is by far the biggest underweight, closely followed by the yen and again sterling. So across fixed income and across FX.

We see institutional investors underweight the US and underweight the UK. Again, as with fixed income, we see a big overweight in Australia. The RBA obviously have been the first G10 central bank to start reversing their previous cuts.

Whereas if we think about the US and the UK, the Bank of England and the Fed, they are expected to be easing rates this year, which helps to explain why we have these underweights in those currencies. For Japan, rates are extremely low. The Bank of Japan has been slow to hike, and that probably explains some of the underweight in the yen as well.

So does this mean we can expect the dollar to rally from here? Not necessarily. The chart I show you on the left hand side only starts in 2018. If I take that back to the start of our data in 2005.

What you can see is we have had periods of more substantial dollar underweights previously.

So yes, there is a big underweight in the dollar, but if the Fed really do deliver at least two interest rate cuts this year, which is the expectation, then one can expect the dollar to continue to suffer, and we could expect institutional investors to continue to sell.

perhaps taking that dollar underweight back to some of those previous lows we've seen.

That's all for this month. Hopefully that's given you a picture of where we stand in the world right now. And we'll be back next month with a further update. Thank you for listening.

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Institutional Investor Indicators: February 2026

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