Risk-off sentiment drives selective equity positioning – BNY

Markets remain broadly risk-off amid elevated valuations and persistent geopolitical risks, prompting asset allocators to reassess country and sector exposures for potential corrections, BNY's FX analysts report.

Tech and AI dominate holdings amid market caution

"Recent developments have mainly affected trade and credit-related factors, but positioning that is not aligned with fundamentals is also under review as earnings headwinds build through the reporting cycle. Across the coverage universe, nine out of 45 tracked equity markets currently show holdings scores above 20%, driven by firm price levels and improving flow metrics. By sector, elevated holdings are concentrated in AI and technology-linked groups across emerging markets and developed markets."

"This concentration appears in regional composites for Asia, Europe and the Americas. In developed markets, semiconductors and semiconductor equipment is the most heavily held industry group and the only one maintaining holdings more than 20% above the rolling twelve-month average. Materials, supported by higher gold prices, rank fourth in the sector league table, while technology hardware ranks fifth. Autos and components also show comparatively strong holdings despite a weak narrative for traditional automakers – a pattern associated with base effects from prior underperformance."

"As China’s electric vehicle sector faces ongoing challenges, outcomes within the broader auto complex differ across major production hubs and supply chains. Materials exposures remain sensitive to moves in gold, which have supported recent positioning. Overall, the dataset shows concentrated strength in technology-linked industries, firm materials exposure tied to commodity dynamics, and notable participation in autos and components under prevailing risk-off market conditions and elevated valuation levels."