Equity allocations across portfolios showed little net change, though discretionary investors are noticeably reallocating away from mega-cap growth and technology names into cyclical sectors, according to strategists at Deutsche Bank. The team, led by Parag Thatte, emphasized that a lasting shift will require broader participation across the market - a condition that has been lacking during previous episodes when cyclical positioning briefly strengthened but then faded.
Fund-flow data for the most recent week underline the shifting preferences. Equity funds recorded a collective outflow of $43.2 billion. That headline number masks a pronounced concentration of withdrawals from China-focused funds, which totaled $49.1 billion. U.S.-focused equity funds also experienced net redemptions of $16.8 billion.
Within equities, capital gravitated toward cyclical segments. Materials funds attracted $6.5 billion in new money, while industrials drew $3 billion. By contrast, technology funds saw money leave, with net outflows of $1.4 billion.
Outside of equities, investors added to fixed income and cash-like instruments during the week. Bond funds took in $15.4 billion, and money-market funds received $0.7 billion in inflows.
Deutsche Bank's strategists flagged an important caveat: for the rotation from growth and tech into cyclicals to be more than a transient reallocation, it must be accompanied by sustained market breadth. The team pointed to historical patterns in which sporadic increases in cyclical exposure did not persist, implying that current flows could represent a temporary dislocation unless broader investor engagement follows.
The data present a mixed picture: meaningful movement within sector allocations, but limited change in overall equity positioning. That distinction frames both the immediate market reaction and the conditions necessary for any durable reassessment of sector leadership.
Data highlights:
- Equity funds - net outflow: $43.2 billion
- China-focused equity withdrawals: $49.1 billion
- U.S. equity funds - net outflow: $16.8 billion
- Materials funds - net inflow: $6.5 billion
- Industrials funds - net inflow: $3 billion
- Technology funds - net outflow: $1.4 billion
- Bond funds - net inflow: $15.4 billion
- Money-market funds - net inflow: $0.7 billion