Short positions are about to disappear, and the S&P 500 index holdings are "completely one-sided."

With short sellers surrendering and optimism driving U.S. stocks to record highs, bullish positions on U.S. stocks have reached an all-time high.

Citigroup strategists stated that the positioning in the S&P 500 index is "completely one-sided," with bullish positions hitting new records as short sellers give up. This refers to the proportion of investors who are "bullish" on the S&P 500 index, that is, the ratio of investors betting that the market will continue to rise versus those holding opposing views.

Analysts led by Chris Montagu wrote in a report on Monday: "The positioning in the S&P 500 index has reached a new high for the fourth consecutive week, with more and more short sellers surrendering."

As a result, among the major stock indices covered in the analysts' report, the U.S. stock index saw the largest increase. Analysts noted that this makes it even more difficult for the remaining short sellers.

They wrote: "The three major U.S. markets are currently the longest bullish and most profitable markets in the report. As we mentioned last week, contrarian traders have not been rewarded."

This analysis comes against the backdrop of a sustained rebound in the U.S. stock market this year, with investor sentiment running high, as the S&P 500 index has risen 28% year-to-date.

Trump's victory in the election, along with his proposed corporate tax cuts and deregulation measures, is expected to lead to stronger business activity and profit growth.

Analysts stated that "investors' preference for U.S. stocks exceeds their preference for international stocks, accelerating the rebound in U.S. stocks and widening the gap in net positions between the U.S. and European markets."

The bullish positions in the S&P 500 index "stand in stark contrast to the positions in the European Stoxx index, which has been in net short territory for several weeks, with 100% of the bulls in a losing position," analysts said. They also noted, "The gap in positioning between the two regions will only continue to widen."

In recent weeks, investors have been bearish on European stocks. Citigroup indicated that investor sentiment may remain unchanged due to the potential for further political turmoil in France.

European stocks have lagged since peaking in September due to concerns over potential U.S. tariffs, geopolitical risks, and regional economic downturns. Political turmoil in France has exacerbated these concerns, with French lawmakers set to hold a no-confidence vote on Wednesday.

In dollar terms, "the European benchmark Stoxx 600 index has underperformed the S&P 500 index by more than 25 percentage points this year, marking the largest gap of the century."

However, Citigroup's strategists indicated that the current loss positions suggest a low risk of forced selling of European stocks. Ulrich Urbahn, head of multi-asset strategy and research at Berenberg, stated that he has recently increased his investment in European stocks, believing that the bear market has been priced in. He said: "Given the pessimistic positioning, rebalancing fund flows, hopes for the German elections and Chinese macro data, a weaker euro, and the potential end of the Ukraine conflict, European stocks have opportunities until February next year."

Source: Jin Shi Data