Wall Street positioning has turned markedly defensive even as equity valuations stretch to levels rarely seen in the past two decades. Deutsche Bank estimates show consolidated equity exposure among institutional investors sitting below historical averages, while hedge-fund short positions have climbed to multi-month highs, particularly in Russell 2000 constituents. At the same time, gross leverage—the sum of long and short books—remains close to record territory, suggesting funds are aggressively betting on both sides of the market despite keeping overall net exposure muted. The shift in positioning comes against a backdrop of elevated valuations. The S&P 500 now trades at roughly 22 times forward earnings, well above its 20-year median of about 16. The Nasdaq 100 fetches 27 times projected profits, and the small-cap-heavy Russell 2000 is at 24 times, according to market data compiled on June 22. Retail wealth clients are also reshuffling holdings. Recent flow data indicate purchases of high-yield bonds, master-limited partnerships and Treasury Inflation-Protected Securities, while allocations to Japanese equities, bank loans and dividend-oriented U.S. stocks have been pared back. Despite the defensive stance and rich multiples, some strategists point to historical patterns that could temper bearish expectations. The S&P 500 is down 15 % so far in 2025, yet prior mid-year reversals of similar magnitude have been followed by strong gains in the second half when the economy avoided recession. Whether that precedent holds may depend on the durability of corporate earnings and the broader macro backdrop.