In September, the MSCI World gained 3.25%, large cap stocks outperformed mid and small cap stocks. The tech-heavy Nasdaq Composite index gained 5.61% as AI fervor took another leg higher. Seasonality factors were turned upside down when US stocks registered their best September in 15 years

The Russell 2000 is now up almost 10% since November 20th driven by anticipation of a continued fall in US interest rates. All eyes are on the Fed meeting next week to shape the risk taking environment for the remainder of 2025.

The prospect of easier financing conditions in the USA in the months ahead is igniting reflation themes. Metals and small caps have gone wild since the Fed pivot on November 21st.

The lack of strong market breadth YTD has been a prominent feature of the market backdrop, evidenced by 35% of the S&P 500 now currently in bear market territory.

The lack of market breadth has been negatively impacting Equity Long/Short strategies that seek to select stocks outside of the Mag 7 to own while use a mix of individual equity shorts and market hedges on the short side.

The lack of visibility on Fed policy, exacerbated by a lack of official data in the wake of the government shutdown, is curtailing the opportunity set for Macro US FX/Rates trading. Additionally, risk sentiment generally has lacked much direction, because of the cloudy rate outlook. • The probability of a Federal Reserve rate cut in December 2025 sharply declined over recent weeks, falling from nearly 100% a month ago to approximately 30-40% as of yesterday, but now this morning Fed officials are taking on a more dovish tone, bringing the expectations back to ~75% for a cut.

YTD, Korea has been one of the hottest markets globally with notable outperformance of US indices in recent months.

A potent combination of domestic and pan-Asia retail activity with global institutional investor inflows spurred on the rally, with the index up over 60% YTD.

This year the S&P 500 is on a bit of a hybrid/WFH schedule rallying at the start of the week then closing out Thursday and Friday with more sellers than buyers.

The trend could be in place due to the heightened geopolitical and domestic political uncertainty inspiring investors to de-risk into the weekend.

Perma bear journalist Bond Vigilantes.com put together a spooky chartpack. Among the scariest of charts was one showing a slowdown in freight shipments. The Cass Freight Index is approaching GFC and covid low levels. Restrictive monetary policy and a weaking consumer has fueled the drop in activity since 2021, and the impact of tariffs have yet to be fully reflected in the data.

In September, the MSCI World gained 3.25%, large cap stocks outperformed mid and small cap stocks. The tech-heavy Nasdaq Composite index gained 5.61% as AI fervor took another leg higher. Seasonality factors were turned upside down when US stocks registered their best September in 15 years.

The market finally took a breather this week, pulling back slightly from all-time highs as the US government shutdown continues with no end in sight. While the shutdown has not yet caused a major risk-off event, the lack of progress is starting to weigh on sentiment. Beneath the surface, the semiconductor space continues its relentless rally, punishing short-sellers and highlighting the market's speculative fervor.

As market participants contemplate where we are in the cycle, reviewing market price action in the late 1990s is instructive. After the Fed bailed out LTCM in 1998, a strong, orderly rally followed. Then, from October 1999 to March 2000, the Nasdaq doubled in a ferocious speculative rally.