Hi YXI friends,

The market doesn’t seem to give easy days like the summer of 2025 anymore. There is a dichotomy between the indices and the individual stocks: the 2025 winners are all entering bear-market territory, while SPY is barely off its all-time high.

This has left many people scratching their head on the market regime we are in.

My read is that liquidity, since Q4, has not provided much support to the market (higher long-end yields, TGA balances, funding stress).

Instead of fleeing the indices, money has rotated out of the previous winners and into commodities and defensive stocks. RPV, S&P Value ETF, is up 19% since the October low.

If liquidity conditions persist, we could see money flow out of recent winners to buy new laggards (think Mag-7s) again, while indices continue to grind sideways.

However, if liquidity conditions loosen, e.g. TGA comes down, and long-end yields continue to decline, we can see an overall market boost that helps the indices break new highs and the fallen soldiers (like IGV and Crypto) resurrect.

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