Deutsche Bank said in a Sept. 25, 2026 report on investor positioning and fund flows that the rotation into technology stocks still has room to extend. Since late July, tech has gained 14% and reached a record high, while the rest of the S&P 500 has fallen 3% over the same stretch.
The report, cited by TechFlowPost in a piece written by Rita, argues that the move can continue because technology positioning, while clearly overweight, remains well below the peak seen in early June.
Tech positioning is elevated, but not back at the June extreme
Deutsche Bank said tech positioning stands at 0.8 standard deviations, or the 80th percentile. That marks a clear overweight, but it is still below the early-June high of nearly 2 standard deviations and the 99th percentile.
Positioning in other sectors is neutral or slightly below neutral, the report said, covering both defensive and cyclical groups. Energy is the only other sector that is modestly overweight.
Binky Chadha, Deutsche Bank’s chief strategist, said overall large-cap positioning is at the 79th percentile, overweight but not extreme. Systematic strategies have risen to the 91st percentile, placing them in the top decile and making them more vulnerable to volatility shocks. Discretionary investors, by comparison, are only at the 64th percentile despite strong earnings growth, with positioning held back by a surge in rate volatility.
Rate volatility is the key variable for discretionary investors
Deutsche Bank said discretionary investor positioning has a negative 89% correlation with the MOVE Index, the bond-market volatility gauge. Since 2021, each one-unit increase in rate volatility has been matched by a corresponding decline in discretionary positioning. In the bank’s view, rate volatility matters more for equities than the level of rates itself.
After rate volatility jumped in August, discretionary investors moved from a clear underweight to a slight underweight. Deutsche Bank said a pullback in rate volatility is the condition needed for that group to add more exposure.
Systematic strategies are already heavily invested, leaving less room for additional buying. The report said that also weakens the flow support available during a market pullback.
Systematic positioning is high across several strategies
Volatility-control funds have equity allocations at the 98th percentile, which the report said raises their sensitivity to downside moves. Commodity trading advisors, or CTAs, are at the 82nd percentile in equities overall. By region, the report puts the U.S. at the 90th percentile, Europe at the 85th percentile, emerging markets at the 75th percentile, and Japan at the 62nd percentile.
Deutsche Bank said any further increase in these positions would depend on lower volatility rather than trend signals, which are no longer the main driver.
Technology remains the clearest overweight sector
Among sectors, technology is the only area that stands out as clearly overweight. Energy is modestly overweight at the 73rd percentile.
Other cyclical sectors are lighter. Consumer cyclicals are at the 61st percentile, industrial cyclicals at the 43rd percentile, financials at the 29th percentile, and materials at the 22nd percentile.
Within defensive sectors, healthcare is at the 53rd percentile, consumer staples at the 30th percentile, real estate at the 44th percentile, and utilities at the 18th percentile. Deutsche Bank said the gap between tech and the rest of the market is one reason the current rotation can continue.
Fund flows split between equities, bonds, and money markets
In the week through Sept. 23, equity funds saw $10.2 billion in outflows, the first outflow in three months. U.S. equity funds lost $21.2 billion, the largest outflow in six months. Global funds still posted $13.3 billion in inflows, extending the streak to a sixth straight month.
By region, Japan recorded $300 million in inflows, Europe saw $400 million in outflows, emerging markets lost $3.9 billion, Asia ex-Japan lost $3.6 billion, and China saw $2.4 billion in outflows.
Bond funds took in $17.3 billion, faster than the previous week. Broad bond funds drew $6.4 billion, the highest in three weeks. Government bonds brought in $2.4 billion, the smallest amount in three months. Investment-grade debt added $2 billion, while high-yield bonds posted a small inflow. Emerging-market debt drew $4.7 billion, the highest in four months, and bank loans took in $1.7 billion, the largest since February 2025.
Money market funds recorded $11.6 billion in inflows. The U.S. accounted for $17.2 billion, while Japan saw $1.3 billion in outflows and Europe posted $900 million in outflows.
Deutsche Bank keeps its S&P 500 target at 8,000
Deutsche Bank maintained its 2026 target for the S&P 500 at 8,000. It also kept its earnings-per-share forecasts at $358 for 2026 and $420 for 2027.
The report’s allocation message centers on three points. First, tech positioning remains below its prior peak, leaving room for the rotation to continue. Second, discretionary investors are still lightly positioned, and lower rate volatility would be the signal for more buying. Third, systematic strategies are already heavily positioned, which reduces flow support during market pullbacks and leaves the market more exposed to volatility shocks.
TechFlowPost said the article was a整理与解读 of a third-party brokerage report from Deutsche Bank dated Sept. 25, 2026, combined with public market information. It added that the ratings, target prices, earnings forecasts, and related judgments cited in the piece are the views of the brokerage analysts and represent only the stance of their institution, not that of Chaoxiang Research, and do not constitute investment advice.
The article also said markets carry risk, decisions should be made independently, and the report should not be used as the basis for buying or selling any security.
