Nothing Ever Happens
Hello All,
To kick the recap off, despite the U.S.–Iran headline noise, it’s been a relatively quieter yet choppier week on the index level, as last week’s under-the-hood volatility (dispersion) has finally started to simmer down following the rolling sector blowups tied to AI-disruption fears. With that being said, to round out the week, we have PCE #’s in the morning (the Fed’s preferred gauge of inflation), and recent data continues to reiterate ‘Goldilocks’ conditions, although we also have a potential Supreme Court ruling on Trump’s tariffs as well.
Nevertheless, on the week, yet again Small-Caps are the best-performing of the indices, higher by just under 70bps, whereas the Dow is the ‘worst’ performing index, although it remains essentially flat on the week (-12bps).
For those who may have missed, we published our ‘2026 Outlook’ which has a plethora of coverage on a wide range of topics / themes as ‘26 kicks off after coming off a strong ‘25 & for those whom would like to go back & read the report, I included it just below:
And for anyone who wants to follow an actively managed portfolio in real time:
I’ve joined Plutus as the cleanest, day-to-day way to track an actively managed portfolio in real time. It’s a live dashboard that’s broader, more diversified, actively managed by me, & updated continuously.
The Eliant Flagship is published on RunPlutus.
Once your Plutus account is approved, you’ll have the option to allocate right away. If you do, it’s straightforward: create an account, link your brokerage (Available only for IBKR at this time), & select the Eliant Flagship (or any of the baskets I’ve built). Your money stays in your account, and trades, position changes, and rebalances are replicated automatically so there’s nothing manual to manage. The idea is to make it easier to access an actively managed portfolio run by me without the overhead of traditional fund structures or high minimums, whilst you keep full custody of your assets & I stay focused on research, positioning, and portfolio construction.
And just to be clear, NOTHING is changing with Substack. It’ll stay exactly what it’s always been since we originally launched in the Summer of ‘23: where I share the thinking, research, & select trades behind my personal PA, along with ongoing commentary across all markets.
Earlier in 2024, we launched a series titled Educational Pieces, covering a wide range of topics, many of which were suggested directly by you all (4-Part Series).
For those who may have missed the first installment, it covered topics including:
General background / knowledge on all option strategies
In-depth talk on risk / reversals & how to go about expressing / utilizing them
Options Structuring
When to used naked calls / puts vs. spreads
Choosing expiration dates
Identifying key pivots / supports / resistance zones
General briefing on stock gaps
What to look for in regards to fundamentals
Implementing fundamental / macro / technicals into a trade
Hedging
Creating risk/reward setups
Taking profits / managing losses
Overall Process
Book recommendations
A link to the original Educational Piece can be found here .
Given the positive feedback and how useful many of you found the first installment, we followed up with Educational Piece: Part Deux earlier in 2025 & for those who may have missed, a link to the piece can be found here & we then went on to release Educational Piece: Part Trois which can be found here.
And finally, the most recent installment, Educational Piece: Part Quatre, can be found here.
‘Risk management is the silent prerequisite for compounding & true wealth is built not by chasing the highest returns but by ensuring the survival necessary to realize them.’
Jumping straight into it, as we mentioned earlier but comparatively to this past week, it’s been much quieter, granted, much choppier as well but the continued rotation & or favoring of Value over Growth has remained as the gap between the group still sits just over 11% on the year:
With that being said, an interesting factor worth highlighting is the magnitude of the recent underperformance of mega-caps relative to the broader S&P 500, with the 12-period rate of change in the $OEX:$SPX ratio currently sitting around -1.37%. Historically, readings near these levels have tended to coincide with the later stages of mega-cap underperformance rather than the start of it, often marking points where the rotation begins to stabilize or mean-revert as leadership broadens out. While not a precise timing tool, this degree of relative weakness has more often than not signaled that much of the de-crowding in mega-caps has already occurred, suggesting the rotation may be closer to exhaustion than acceleration if broader market conditions remain supportive:
And adding to the point above, IWN/IWF (Value over Growth), while up roughly 24% since bottoming in mid-’25, is now approaching the ’20 lows / ’24 highs. As a result, if there were to be a reversal or at least a near-term snapback in the recent Value-over-Growth trend, we’re likely getting fairly close, even if IWN/IWF ultimately continues to head higher over the medium term.
And again, in terms of why this period of Value over Growth outperformance has amplified these last couple of weeks, the biggest factor has been due to the pricing-in of an ongoing economic re-acceleration as inflation still remains relatively tame.
What kicked this off a couple of weeks back, or at least amplified it, was the ISM Manufacturing Index jumping to 52.6, marking the highest reading since January ’22. A move back into expansion territory reinforces the narrative of an industrial re-acceleration, which tends to favor value, cyclicals, and smaller caps, helping explain the recent momentum behind the Value-over-Growth rotation.
And since then, momentum around an economic re-acceleration, and more specifically a ‘Goldilocks’ backdrop, has continued to build, with today’s Philly Fed Manufacturing Index once again reinforcing that narrative as business activity improved whilst prices paid moved lower:
Jobless claims have also continued to reinforce a ‘Goldilocks’ backdrop, as the low-hire, low-fire labor regime persists, signaling stability in employment without the kind of labor market tightness that would typically reaccelerate inflation:
And as we’ve touched on these last few weeks but in regard to the pricing-in of an economic re-acceleration (Value-over-Growth), of the 5 best performing sectors YTD, the top 3 are Cyclical:
- Energy (Cyclical)
- Materials (Cyclical)
- Industrials (Cyclical)
- Staples (Defensive)
- Utilities (Defensive)
As a result, despite the recent whipsaw action along with Spooz being just over 200bps off ATHs, the Advance-Decline Line has still continued to churn and make higher-highs:
With that being said, despite the broadening of upside participation along with the continued higher-highs within the Advance-Decline Index, the % of Stocks Above the 20D still remains more neutral (Instead of overbought & or oversold) as it currently sits at 51% which is mostly attributed to the vast single stock volatility:
And similar can be said on a more broader timeframe as well as there is still 56% of stocks remaining above the 50D (Neutral Reading) despite the Nasdaq for example remaining firmly below the 100D (Not far above the 200D either) which just emphasizes the recent & or amplified dispersion within the markets:
However, contrary to the above, and despite neutral signals implied by the continued broadening in upside participation, the Fear-Greed Index has slipped back into fear territory & this comes even as market breadth continues to improve & the Advance–Decline Index pushes to new highs, once again highlighting the degree of dispersion across the market. Elevated single-stock volatility remains a defining feature, with something akin to Liberation Day–style moves occurring at the individual name level, even as the indices themselves remain only marginally off their highs:
And in respect to positioning, despite Spooz having only pulled back about 200bps from all-time highs, Goldman’s U.S. equity sentiment indicator has already slipped back into negative territory. Considering the persistent calls of market exuberance and bubble conditions, sentiment and positioning remain far removed from levels typically associated with true market euphoria.
And finally, before we jump into the remainder of the recap, the chart below from BofA reinforces this point as well, showing near-historic levels of outflows, with the latest reading marking the third-largest outflow since records began in ‘08. This is not what you typically see in a market characterized by bullish exuberance; instead, it points to a market built on a significant amount of skepticism and upside complacency rather than euphoria.
