Markets Wake Up...

A headline-driven market is subject to higher risk...

Good morning:

There’s something to be said about the power of positive headlines and their ability to defy logic.

Tesla’s up this morning despite profits falling 71% and deliveries dropping — there’s nothing in those numbers to cheer.

But markets heard exactly what they needed from Bessent, hinting at trade “de-escalation” and Trump suddenly having “no intention” of firing Powell.

Our momentum gauge has shifted to a positive reading, with breakouts tripling from 5 to 12 stocks, while breakdowns have decreased to just 5. The VIX finally cracked below 30, but it’s still sitting 19 points below realized volatility — that’s the actual day-to-day movement we’ve seen in the market over the past month.

It’s the largest gap between expected and actual volatility since the early days of the COVID-19 pandemic. That kind of disconnect doesn’t happen often. Whether it’s positioning, intervention, or just collective denial, something seems to be keeping volatility artificially suppressed while the mark…