Deutsche Bank said in an investor positioning and flow report dated Sept. 25, 2026 that the recent rotation into technology stocks still has room to continue. Since late July, the tech trade has gained 14% and reached a record high, while the rest of the S&P 500 has fallen 3% over the same stretch.
Tech positioning is elevated, but still below the June extreme
The bank tied its call to the current split in market positioning. Tech exposure stands at 0.8 standard deviations, or the 80th percentile. That is clearly overweight, but still well below the early-June peak, when positioning was close to 2 standard deviations and the 99th percentile.
Outside technology, positioning across other sectors is mostly neutral or slightly below neutral. That applies to both defensive and cyclical groups, with energy the only area showing a modest overweight.
Binky Chadha, Deutsche Bank’s chief strategist, said aggregate large-cap positioning is at the 79th percentile, overweight but not extreme. Systematic strategy exposure has risen to the 91st percentile, placing it in the top decile and leaving it more exposed to volatility shocks. Discretionary investors, by contrast, are only at the 64th percentile, even with strong earnings growth, because higher rate volatility has held them back.
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 rise 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.
The report said the jump in rate volatility in August pushed discretionary investors from a clear underweight to a slight underweight. A retreat in rate volatility would be the condition for those investors to add exposure again.
At the same time, systematic strategies are already heavily positioned, leaving limited room for further buying. That also means less flow support if the market pulls back.
Systematic strategies are already near the top of the range
Volatility-control funds are at the 98th percentile in equity allocation, according to the report, which said their sensitivity to market declines is rising. Commodity trading advisors, or CTAs, are at the 82nd percentile in equities overall. Regional readings were 90th percentile in the U.S., 85th in Europe, 75th in emerging markets, and 62nd in Japan.
Deutsche Bank said additional CTA buying would also depend on lower volatility, with trend signals no longer the main driver.
Technology remains the clearest overweight sector
By sector, technology is the only clearly overweight area in the market. Energy is modestly overweight at the 73rd percentile. Other cyclical sectors remain lighter: consumer cyclicals are at the 61st percentile, industrials at the 43rd, financials at the 29th, and materials at the 22nd.
Within defensives, healthcare is at the 53rd percentile, consumer staples at the 30th, real estate at the 44th, and utilities at the 18th. Deutsche Bank said the positioning gap between tech and the rest of the market is what supports the continuation of the current rotation.
Equity funds saw outflows in the week ended Sept. 23
Fund flow data showed $10.2 billion left equity funds in the week ended Sept. 23, the first weekly outflow in three months. U.S. equity funds accounted for $21.2 billion in outflows, the largest in six months.
By region, global funds took in $13.3 billion for a sixth straight month. Japan saw $300 million of inflows, while Europe posted $400 million of outflows. Emerging markets lost $3.9 billion, Asia ex-Japan saw $3.6 billion of outflows, and China recorded $2.4 billion of outflows.
Bond fund inflows accelerated, money market funds added $11.6 billion
Bond funds brought in $17.3 billion, faster than the prior week. Broad bond funds took in $6.4 billion, the highest in three weeks. Government bonds drew $2.4 billion, the smallest inflow in three months. Investment-grade funds added $2 billion, while high-yield debt posted a small inflow.
Emerging-market debt drew $4.7 billion, the highest in four months. Bank loans brought in $1.7 billion, the largest inflow since February 2025.
Money market funds added $11.6 billion overall. The U.S. contributed $17.2 billion, while Japan saw $1.3 billion of outflows and Europe posted $900 million of outflows.
Deutsche Bank keeps its 2026 S&P 500 target at 8,000
Deutsche Bank maintained its 2026 year-end target for the S&P 500 at 8,000. It also kept earnings per share forecasts at $358 for 2026 and $420 for 2027.
The bank’s allocation view centered on three points: tech positioning is still below its prior peak and the rotation can continue; discretionary investors remain underpositioned and would need lower rate volatility to add; and systematic strategies are already highly exposed, reducing the amount of flow support available during a market pullback.