Since the April 8th low, the S&P 500 is up +26% - technically, it’s back in a bull market.

‍Quant Insight's Risk Model attribution for that return suggests a split of almost two halves:

‍- 56% macro

‍‍- 44% idiosyncratic (the bit macro could not explain)

‍Relationships are shifting - from a singular focus on the end of US Exceptionalism to Goldilocks Vibes.

Consider the following: In Q1, US equities underperformed. In Q2, it outperformed — despite a weak dollar both times…

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So what does Qi's Risk model show:

‍- Sensitivity to GDP growth = multi-year highs

- Sensitivity to inflation & real rates =multi-year lows

→ Citi US Eco vs. Inflation surprises say itall: growth is holding up, inflation’s cooling

→ Real rates are down 45bps from YTD highs

- Sensitivity to Dollar flipping from positive to now small negative…

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Looks like Goldilocks: Fed opening up possibility of cuts, but in a backdrop where growth / inflation trade-off is benign.

Coming up: Trump’s tariff call (July 9) + CPI (week after)

What about that large idio component? US Tech doing its thing

You buy Tech for secular growth, not macro.

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Over the last 3months, the idiosyncratic return (what our model can’t explain via macro) forTech (XLK) has jumped dramatically:

- 3M Sharpe of idio component = 5

→ Near the top of its range in recent years

Coming up: Q2 earnings kick off next week, with Tech heavyweights report soon after.

Needless to say, the market pricing provides less of a cushion against disappointment than it did. Our S&P500 Qi total risk indicator is not quite at “macro complacency” but it has climbed a long way from “macro fear”

Charts below.

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