What if we get good news? On tariffs or, say, on Mag7 earnings.

We know the last several, cursed weeks were defined by deleveraging and deteriorating sentiment both among professional money managers and individual investors, even if some undoubtedly bought the dip.

The figure below shows Goldman’s Sentiment Indicator for stocks as it stood headed into this week. Anything below -1’s indicative of light positioning, so -1.7’s very light. The local low was -2.5 the prior week, which represented one of the most negative readings in the history of the series.

For reference, that’s a composite gauge which rolls up nine measures of positioning across institutional, retail and foreign investors.

As the bank’s David Kostin reminded clients, extremes on that indicator were “statistically significant signals for near-term S&P returns” in the past, but… well, suffice to say there are a lot of caveats right now.

“Light positioning creates the potential for upside in the event of an improvement in the policy and economic outlooks [but] the market does not appear to be appropriately reflecting the elevated risk of recession,” Kostin said.

In addition to that (i.e., on top of fundamental macro considerations), it’s important to note that just because systematic positioning might’ve bottomed out doesn’t necessarily mean those strats will re-leverage in a hurry. You need a reset back lower in realized vol, and that may be a tall order considering who’s in the Oval Office.

“Even if one was constructive and timely, there’s not enough ‘net on’ because the lookbacks have too many acute ‘big move’ deleveraging events,” Nomura’s Charlie McElligott said Thursday. “And now we are simply in the chronic stage, with both one-month and three-month SPX realized vol currently at 100%ile and stuck higher in the new ‘Trump = Human Vol of Vol’ regime.”

The figure just shows one- and three-month realized, as well as allocation estimates across systematic strats.

As Charlie noted, it’s going to be a while before vol recedes given the sheer number of wild days we’ve seen over the past several weeks. Those sessions need to drop from the lookback, and you also need things to calm down so that when those days do fall out of the window, they’re not just replaced by more fireworks.

McElligott summed it up. “The point is that there’s really just not enough notional ‘ammo’ out there to push equities back massively higher even if you start getting good news,” he said. “Volatility is your exposure toggle in modern market structure [and] the current and sustained high rVol and vVol environment mechanically forc[es] lower gross and net exposure.”