Momentum unwind and rotation are gaining traction as investors take profits in Tech and display increased bullishness on the Consumer discretionary trade. According to UBS’s latest S&T insights, Russell is outperforming Nasdaq by 1.8% and has been steadily growing throughout the day. While single stock volatility remains extreme, index volatility is subdued. Interestingly, broad moves suggest the footprint of quants, as active investors have turned sellers over the past two hours.

The UBS desk notes that there is a concentrated unwind component in Basic Chems and Defense Primes (shorts squeezed and longs lagging), AI-exposed Industrials, and non-Nuclear power names. Additionally, they are seeing Long Only supply in Consumer flows, with the desk selling Tech. Within Tech, outflows are primarily seen in AI semis/hardware, while Industrials/Utes have consistent supply in AI-levered names across the board.

The UBS S&T desk highlights that the current momentum unwind and rotation are not limited to any particular sector or group of stocks, but rather are a broad-based phenomenon. This suggests that investors are taking profits across the board and shifting their focus towards more attractive areas of the market.

Overall, UBS’s insights suggest that the current market dynamics may result in some near-term pain for certain stocks and sectors, but could also present opportunities for long-term investors to position themselves in more attractive areas of the market. As always, it is important to stay informed and adapt one’s investment strategy accordingly to reflect changing market conditions.