Interview
"This is what people were hoping for”
- Market demand is projected to persist in late May through mechanical flows and buybacks, with approximately $1 trillion in repurchases expected to suppress volatility, while roughly $180 billion in volatility-selling ETF assets may supply fixed-strike volatility at the front of the curve.
- Volatility is anticipated to compress further and quiet during the summer absent new information, though a premium above the pre-event steady state of 11 is expected, with the three-month S&P $25 call trading near 13.
- July 9th represents a critical deadline for global tariff and trade negotiations, creating uncertainty specifically regarding difficult European outcomes and an uncertain Japanese leg.
- The prevailing investment narrative is shifting toward U.S. technology and AI, which is viewed as a constructive, bullish theme still early in its adoption cycle, estimated at only 9% of U.S. corporates.
- Market focus is transitioning from the jobs report to upcoming CPI data, with inflation concerns diminishing but rates remaining a primary constraint on market performance.
- Corporate monitoring will prioritize upcoming earnings reports from major U.S. tech firms and recent guidance resets, particularly within the consumer sector, to assess trends for the second half of Q2.
- Potential risks include upside surprises in inflation data, a market pivot toward rate concerns causing European headwinds and continued laggard performance in Russell indices, and the possibility of investors lacking desired AI exposure despite sector interest.