As the risk tone stabilizes and tactical rebounds off oversold conditions, conviction remains low among long-only accounts, while hedge fund activity is balanced with muted shorting. This suggests a lack of aggressive risk re-engagement beneath the index-level bounce. The tape continues to be driven more by factor rotation than outright flow, with high correlation between 1-day and YTD performance signaling a continuation of crowded positioning dynamics rather than fresh capital deployment.

Within Technology, there is a clear bifurcation, with “pick-and-shovel” beneficiaries bid while funding pressure persists in software and Megacap growth. Oracle’s elevated capex guidance has reignited demand for AI infrastructure, leading to outperformance from semiconductors and memory, while simultaneously pressuring hyperscalers and software on ROI and incremental supply concerns. The Mag 7 and the iShares Expanded Tech-Software Sector ETF (IGV) are acting as primary sources of funds. However, flows into semiconductors are only modestly positive and decelerating, indicating a more positioning- and price-led move rather than flow-confirmed buying.

Cross-sector rotation is leaning pro-cyclical on the margin, with Industrials, Materials, and select Energy and Metals catching a bid alongside small-cap strength. Defensives (Staples) and rate-sensitive pockets (real estate investment trusts, REITs, and parts of Financials) lag, but there is net buying into Telecos and Utilities, suggesting some barbell positioning rather than a clean risk-on regime shift. Within Industrials, there is two-way flow in AI-linked names, with profit-taking alongside selective long-only demand, reinforcing the theme of rotation within winners rather than fresh beta expansion.

Flows remain net for sale in Healthcare and Construction, and while there is some buying in Financials, it is largely driven by a rebound in banks rather than any meaningful shift in investor risk appetite. Overall, the tone remains cautious, with many participants highlighting the ongoing macro uncertainties and the potential for near-term volatility.