JPMorgan said elevated equity positioning and leverage have returned to parts of the market, potentially creating a headwind for stocks during the fourth quarter.
The bank said the current levels of positioning and leverage remain below those recorded earlier in the summer but have increased following a period of deleveraging.
“Elevated equity positioning and leverage have re-emerged, albeit to a lesser extent than last June/July, posing some challenge to equities into Q4,” strategist Nikolaos Panigirtzoglou wrote.
At the end of July, JPMorgan said a previous deleveraging phase had removed most of the excess positioning that had accumulated in equity markets. Two months later, several of the bank’s indicators have increased again.
Leverage through US equity futures has returned to levels close to its highs for the year, according to JPMorgan. The bank’s broader positioning indicator appears to have peaked during September after reaching levels previously recorded in January and August 2025.
Short Positioning and Momentum Exposure Shift
Panigirtzoglou also pointed to changes in short positioning. Short interest in SPY is beginning to increase after reaching a record low in early September, according to the strategist.
Short positions in semiconductor exchange-traded funds have also returned towards more typical levels. JPMorgan said this suggests that much of the previous short covering has already taken place.
Momentum traders, meanwhile, have started rebuilding long positions across several major equity markets, including the Nasdaq, South Korea’s Kospi, Taiwan and Japan’s Nikkei, although JPMorgan said exposure has not returned to previous extremes.
The bank also reported an increase in assets held in leveraged equity ETFs relative to the market value of their underlying securities in recent weeks.
Margin Account Leverage Identified as Key Vulnerability
JPMorgan highlighted margin account leverage as the largest vulnerability among the positioning measures it examined.
According to the bank, margin leverage remained at elevated levels in August and changed relatively little during the broader deleveraging that occurred over the summer.
Despite its concerns about positioning, JPMorgan said the technology and artificial intelligence segment continues to have fundamental support.
The bank cited rising memory prices, increases in capital expenditure forecasts among hyperscale technology companies and stable AI computing prices as factors supporting the sector.