Deutsche Bank recorded a sharp acceleration in equity fund inflows last week, with total inflows reaching $62.2 billion - a two-month peak driven primarily by $47.1 billion allocated to U.S. equities. The bank attributed the strength in U.S. stock demand to typical seasonal patterns in March and a boost from larger-than-usual tax refunds this year.
Despite the headline inflows, Deutsche Bank highlighted a pronounced deterioration in overall investor positioning. Aggregate equity exposure "slumped further into underweight," the bank said, marking the lowest level of positioning since June 2025.
U.S. equity indices ended the week lower in a volatile session as geopolitical tensions in the Middle East intensified and oil prices pushed higher. The S&P 500 fell 1.51% to 6,506.48, and the Nasdaq Composite dropped 2.01% to 21,647.61. The Russell 2000 declined more than 2% and entered correction territory after sliding 10% from its recent high.
Market moves followed a fresh escalation in the Middle East. Iran and Israel reportedly exchanged strikes overnight, and Tehran launched additional attacks on energy infrastructure across the Persian Gulf. U.S. officials said the Pentagon is deploying thousands of additional Marines to the region as Washington increases its military presence amid the intensifying conflict.
Credit markets also showed strain. Deutsche Bank said credit funds experienced $13 billion in outflows last week, the largest weekly outflow in nearly a year. Within that total, investment-grade credit funds saw $4.1 billion in redemptions while high-yield funds recorded $5.5 billion of withdrawals. This represented another consecutive week of outflows across both investment-grade and high-yield segments.
Positioning among systematic strategies softened as well. Deutsche Bank reported that systematic strategy positioning retreated to neutral, with commodity trading advisors continuing to reduce their overall equity long exposure.
Sector-level positioning displayed notable dispersion. Technology allocations were described as "quite underweight," with Software positioning near the bottom decile. Outside Energy, cyclical sectors showed weak positioning: Consumer cyclicals, Materials and Financials were close to levels last observed following U.S. tariff announcements in April 2025.
The juxtaposition of large retail-driven inflows into U.S. equities with an overall move toward underweight positioning and sizable credit redemptions underlines a bifurcated investor stance. Managers and systematic players have pared exposure even as fresh capital enters equity funds, while geopolitical developments and energy infrastructure attacks have amplified market volatility.