(Bloomberg) — Exposure to the S&P 500 has reached levels that were followed by a 10% slump in the past, according to Citigroup Inc. strategists.

Most Read from Bloomberg

Long positions on futures linked to the benchmark index are at the highest since mid-2023 and are looking “particularly extended,” the team led by Chris Montagu wrote in a note.

“We’re not suggesting investors should start to reduce exposure, but the positioning risks do rise when markets get extended like this,” they said.

The S&P 500 had fallen 10% from August through October last year on worries that the Federal Reserve would keep interest rates higher for longer to combat elevated inflation. Technology heavyweights bore the brunt of the losses, exacerbating declines for the broader market.

Investors are more optimistic about the macro outlook this time around as the Fed has already started cutting rates at a time when economic growth remains resilient. The S&P 500 is back near record highs.

Citi’s Montagu also said that profitable positions are less stretched when compared with 2023, “suggesting less capital at risk and therefore less motivation to cover if markets pull back.”

Most Read from Bloomberg Businessweek

©2024 Bloomberg L.P.