I’ve talked a lot recently about… well, about everything. That’s what I do: Talk all day. To several thousand people I’ve never met, and God bless you all for listening. Otherwise, I’d have only myself to talk to and given i) how much I have to say and ii) how bad of a listener I am, I imagine I’d get tired of myself pretty quickly.

In the market context, a fair share of my ad nauseam carrying on this month (and last) centered around the extent to which the summer melt-up in US stocks came courtesy of retail investors and systematic strats, with the latter now mostly “full” on equity exposure after adding back everything purged in the “Liberation Day” panic.

In honor of this week’s new(er) record highs, I thought it was worth highlighting some updated figures which illustrate the point. They come courtesy of — you already know — Nomura’s Charlie McElligott, who on Wednesday said both fiscal and monetary authorities “are signaling you to ‘gun it'” on risk exposure.

The figures on top show leveraged ETF AUM as a proxy for retail sentiment. It’s back at records, which of course has “big league” (“bigly”) implications for end-of-day rebalancing flows. The charts on the bottom give you a sense of the CTA and vol control re-leveraging I talk so much about.

As discussed at some length in the latest Weekly, the concern when it comes to elevated exposure for systematics isn’t that they “decide” to “turn bearish.” They don’t “decide” anything. They’re models. The concern is that as exposure gets dialed up into nosebleed historical %ile rankings, the go-forward becomes asymmetric — less to “buy” in right-tail outcomes, more to “sell” if things go left. If something comes along and “shocks” spot lower and/or triggers a sustained vol expansion, it can be trouble.

McElligott hit on those points Wednesday. “These types of speculative frenzies with vols getting smashed allow for excess positioning, which inevitably overshoots when you get a vol catalyst, especially off of a low base [for] rVol,” Charlie wrote, adding that in such setups, even a “small vol move can create a large de-leveraging shock from crowded longs and high net exposure.”