As policy confusion deepened, investors responded less with panic and more with muscle memory. The late-May bounce off the 200-day moving average wasn’t a vote of confidence—it was reflexive. With buybacks still active and inflation readings easing, traders leaned into buying. But the character of this rally is shifting. Hedge fund gross exposure remains light, even as retail inflows hit new highs. Positioning is increasingly barbell-shaped—risk-on at the edges, defensive in the core. The market isn’t pricing in clarity—it’s pricing in indecision. And that’s the danger.
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As liquidity thins ahead of June’s data dump and the Q2 blackout window, headline risk becomes a market driver. If tariffs escalate or growth data deteriorates, downside gaps could open fast. For now, sentiment is fragile, fund flows are twitchy, and the floor beneath equities feels more technical than fundamental.

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