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Investing.com --Investors have cut their exposure to stocks to some of the lowest levels in years, as worries about economic growth clash with hopes for policy support, as per Deutsche Bank (ETR:DBKGn).

Overall stock market positioning is now well below normal levels, the bank said, as computer-driven funds continue to pull back while traditional investors remain cautious.

So-called systematic strategies, which rely on rules and market signals to make investment decisions, have reduced their exposure to near the lowest point since the COVID-19 shock in March 2020.

One group of these funds, known as volatility control funds, has trimmed its stock holdings so much that small market drops of less than 3% may now trigger them to buy again.

Market volatility spiked earlier this week, with the daily range for the S&P 500 approaching levels last seen in March 2020, but it has started to ease, the bank noted.

If volatility continues to fall, these funds may slowly increase their stock buying.

Meanwhile, traditional fund managers, known as discretionary investors, have kept their exposure low but steady, waiting for economic data to weaken.

Their positioning suggests they are already bracing for a slowdown in GDP growth and company earnings, even though that hasn't shown up clearly in official numbers yet.

A recent pause in trade tensions gave them a reason to raise exposure slightly, but Deutsche Bank says they are unlikely to make major changes unless there are clearer signs from policymakers.

Despite the stock market selloff, new money has continued flowing into equities.

Deutsche Bank said nearly $50 billion moved into stock funds this week, the largest inflow so far this year. U.S. stock funds drew $31 billion, including flows into leveraged funds that bet on rising markets. China also saw strong inflows, with $26 billion, the most in six months.

However, investors pulled money from other regions. European funds saw their first outflows in two months, Japan had its first outflow in six weeks, and global funds saw their biggest weekly withdrawals since December.

Another worrying sign is that much of the recent decline in the S&P 500 has happened during overnight trading, rather than during regular market hours. This is a reversal from the pattern of recent years, where overnight trading was generally stronger.

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