As of Friday morning in the pre-market, the S&P 500 is 2% off of its "all-time-highs" reached February 2nd, but it feels a lot worse out there.

Crypto's utility function and market structure are called into question as the price plummets. Crypto treasury companies are entering dangerous territory pressuring their balance sheets, which could pressure prices even lower.

Corporate earnings, US presidential decrees, central banks and speculative flows are causing market prices to trend, extend and reverse into month-end.

The Russell 2000 has outperformed the S&P 500 and Nasdaq practically every trading day of 2026. The outperformance is fueled by rampant US retail flows and fundamentally driven cyclical rotations as the market "broadens".

Many hedge funds are opportunistic and can sidestep this violent turn of events at a factor/sector/market cap/style level. However, last year's winners are no longer at the top of the charts and that is taking a toll on quant strategies in particular.

Sometimes equities climb a wall of worry and sometimes they just vault over all concerns due ample liquidity and a robust economic setup. With global headline inflation relatively subdued and ex-US equity valuations having substantial room for catch-up, its risk-on.

The start of the year has featured a marked increase in initiatives by the US government on various economic and geopolitical fronts. This chart is included as a very unserious example of how headline driven price action is dominating the market landscape in the first days of the new year.

With "stimmy checks" on the way, the speculative fervor is rampant for those seeking to generate short-term gains from pushing various topical thematic exposures higher. Various areas like speculative aerospace, rare earths, obscure small cap housing/financials companies and small cap commodities are getting bid to the moon.

After accounting for factors that typically explain equity returns, a growing share of U.S. stock returns are tied to a single, common driver. Take one guess of what this driver is? BlackRock and other market participants are urging clients to remain invested in the AI theme. BlackRock in a recent market note told clients that to invest in non-AI opportunities in the US and abroad is a highly influential "active-call" on their portfolios. Instead, they believe owning AI "deliberately" is the winning path ahead.

Yields are rising globally as hiking cycles might get underway around the world. Price action post FOMC has featured small cap outperformance and continued softness in long-dated US government bond yields (TLT ETF).

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.