There’s an “invisible hand” at work and I don’t mean Adam Smith’s thoroughly exhausted metaphor for free-market macro efficiency.

Rather, I mean vol suppression and especially buybacks. Together, those forces work behind the scenes to put a bid under stocks which, if left to their own devices, might be inclined to fall every now and again.

The figures below, from Nomura’s Charlie McElligott, speak for themselves, but even if they didn’t, McElligott included the only annotation you need: “Vol supply, stock demand = higher.”

The figure on the left shows you monthly vol supply (i.e., the “weight,” so to speak, of vol-selling, broken down by source) while the figure on the right is a reminder that buyback authorizations passed $1 trillion in record time this year.

I editorialized around that $1 trillion mark for authorizations late last month in “The Ultimate Dip-Buyer.” As Citadel’s Scott Rubner remarked, that equates to “$4.4 billion per day in equity demand.” Recall that buyback executions are expected to hit $1.2 trillion for 2025, a record.

On the vol suppression point, note from the figure that mass market income products (i.e., ETFs with embedded derivatives) are becoming a bigger and bigger player. AUM across those products has tripled over the past five years to almost $300 billion. The overall monthly vol supply overhang (i.e., from all sources) has doubled over that same period.

As McElligott reminded clients on Wednesday, vol suppression dictates systematic re-leveraging, which is to say it triggers buying from funds which scale into (and out of) equity exposure based on vol levels. Low-vol melt-ups are trending markets almost by definition, so trend-following strategies tend to be buying alongside target vol.

The figures above show you where we are — or where Nomura’s vol team estimates we are — in terms of both target vol and CTA exposure to equities: 100%ile and 94%ile, respectively.

Put all of that together, throw in imminent Fed rate cuts, and you get a market that’s had a very difficult time selling off, particularly given the extent to which big-tech’s money printing license affords the mega-caps virtually unlimited scope for buybacks.

McElligott summed it all up. “The perception” among market participants is that a “‘pulled-forward’ central bank cutting cycle can help smooth the rough edges and help justify” big-tech valuations, he wrote, adding that “perpetual vol supply facilitat[es] mechanical demand, [all] while the cash flow generation out of mega-cap names is a massive source of both demand for stocks and vol suppression.”

Buybacks, he went on, “are more active into pullbacks and passive into a rallying market,” a “latent bid acting as the invisible hand” under equities.