Thursday Morning Notes 6.5

The market is in rally mode again so far this morning, and we now find ourselves within ~3% of ATHs in the S&P 500.

The bar to be bearish is quite high this summer. Hedge Funds and institutional investors remain light on US equities exposure, even after they chased the May rally at a record pace.

Institutional re-buying will continue to be a tailwind for stocks here in June, as they eventually need to get back to neutral/potentially overweight.

If you have done nothing else but follow the positioning flows in 2025, you are having yourself a great year. This is why I have covered the positioning dynamics in such great detail this year. We went from ATH long positioning at the end of January (a bearish contrarian signal) to ~15 year lows in total positioning following Liberation Day and the 20% market decline (a bullish contrarian signal).

Summer trading tends to have lighter volume (until Labor Day/early Sept.), so the money flow dynamics will be even more magnified during the next couple months. To add to the bullishness, 2025 has been a record year for stock buybacks so far.

90% of the SPX is in an open window right now for the next month. Again, a very high bar to be bearish here with no notable catalyst.