The Investor Positioning and Flow report is worth reading. It notes “With the S&P 500 up almost 10% since early June, investors are assessing the sustainability of the risk rally. Our measures show that equity positioning has been fairly flat since mid-June: mutual fund managers have remained neutral while macro hedge and long-short equity funds have stayed underweight. The equity rally has largely been driven by real money inflows: equity inflows of $16bn since early June, compared to $4bn during last year’s post-LTRO rally (Nov-Feb). As we have discussed (“After the Rally”, March 26, 2012), equities should continue to get inflows absent new negative shocks; when the VIX has been below 24, equities have almost always seen inflows…Macro hedge fund beta has moved up only modestly and is still very short; Long-short equity funds have remained 4-7pp underweight since June; Mutual funds have maintained positioning close to neutral; Hybrid funds have cut back exposure over the last 2 weeks toward neutral; Energy is the large, consensus underweight for MFs and HFs; Discretionary and Materials the consensus overweights; Positioning shifts in regional and global funds have been larger than those in US funds and may have been a bigger driver of price movements… Fund managers could chase returns and raise exposures to “catch up” as they have in the last 2 years; mutual funds trail the S&P 500 by 1pp on avg YTD while returns for macro funds (flat) and L-S equity funds (2%) are weak.