Citi strategists said Tuesday that the latest rebound in equity markets was driven by the unwinding of profitable bearish positions rather than new investor inflows.

They argue that for the rally to be sustained, it must be underpinned by fresh bullish inflows, instead of de-risking flows.

According to Citi, U.S. markets experienced a sharper sell-off than European markets in early April and have only seen a partial recovery, leaving most long positions at a loss at current levels.

Notably, there have been no significant new long flows in the U.S. since late March.

In contrast, European markets show a predominantly long investor exposure, with notably bullish positions on banks. However, incremental bullishness appears to be waning, and there are no evident signs of a change in sentiment.

In Asia, particularly in the and indices, bullish sentiment has grown significantly, although net positioning remains neutral.

The Hang Seng stands out with the strongest bullish momentum, marked by the largest weekly surge in bullish flows due to investors initiating new long positions, a trend not observed in other markets.