Rules-based, systematic investor cohorts and vol-sensitive strategies have increased their equity exposure and leverage to the highest levels in at least a year, helping stocks extend a rally that pushed US shares into a bull market this month.

“Momentum traders such as CTAs have been amplifying the equity rally by building up positions, in particular in US tech and Japanese equities,” JPMorgan’s Nikolaos Panigirtzoglou said.

Although discretionary, fundamentals-based investors have (very) recently increased their own stock exposure, systematic buying was widely cited to help explain buoyant stock benchmarks at a time of pervasive macro uncertainty. The disparity between “quants and mortals” made for good headlines last month.

The figure on the left below “suggests momentum-driven hedge funds such as CTAs, which typically apply leverage of around 4x, are currently very long Nikkei and Nasdaq,” Panigirtzoglou wrote, adding that CTAs are “as long equities as they were at the end of 2021” across developed market indexes.

Meanwhile, the steady decline in portfolio vol has pulled in risk parity. As the figure on the right above suggests, their leverage is the highest in a year.

This isn’t exactly news, but it does underscore the extent to which systematics have “done their part,” so to speak.

Although vol-sensitive cohorts could conceivably add more equity exposure, many observers have suggested the fate of the rally hinges in no small part on under-positioned fundamental investors and the $5.4 trillion in sideline cash parked in money market funds.