I suppose it’s just as well we’re not getting a US jobs report on Friday.

If the ADP release was any indication, the government tally likely would’ve shown additional labor market softening or hell, who knows, maybe even a net job loss for September.

Ignorance is bliss and not knowing is a kind of ignorance. US stocks headed into Friday looking to cement their best run of gains since July. So maybe it’s best if we all just persist in a state of ignorant bliss. It sure seems profitable. At least for those fortunate enough to own stocks.

If you’re keeping track at home (or if you’re like me and can’t resist the temptation to log into your online brokerage and IRA portals every day to see how much more you “made” during any given session), another record on Friday for the S&P would make 28 since the benchmark reclaimed all-time highs late in June.

This is the kind of rally that puts people to sleep, almost literally. You won’t be blamed for tuning out. This is one of the more monotonous melt-ups I’ve seen, and now we’re apparently going to cancel government data with the potential to upset it.

If only there were a way to crack down on the release of private sector data, we could just hold one weekly press conference featuring Howard Lutnick and Scott Bessent, who’d declare the US economy booming, inflation nonexistent and the age golden. They’d take questions, but only friendly ones. If anyone from the press said anything untoward, Pete Hegseth could take the lectern and threaten to shoot them in the knees.

I’m joking. Not really, but let’s say I am because otherwise… well, otherwise Pete Hegseth might shoot me in the knees.

Anyway, the figure below’s an updated version of a chart most of you have seen over and over again. It plots the daily change on the benchmark along with short-lookback rVol and three-month trailing realized. I zoomed in to capture the period since the S&P recouped the entirety of the tariff drawdown.

It’s been six weeks since the index moved 1% or more in either direction. There have (still) only been four such moves since late-June. 10-day rVol sports a six-handle. Three-month an eight-handle. There just isn’t anything going on.

Global equity ETFs saw another $30.5 billion worth of inflows over the past week, according to EPFR’s data. That makes — get this — more than $150 billion of inflows in the past three weeks alone.

As a quick aside, I wanted to remark on the ongoing active-to-passive shift which serves to keep a bid not just under the market, but under the market leadership given that dollars allocated to cap-weighted index-tracking products are by definition allocated according to the weight of the index constituents. Have a look at the figure below.

For every dollar which exited long-only equity mutual funds since 2010, two dollars went into equity ETFs, and a lot of that AUM went to products like SPY, QQQ, VOO and so on.

Coming back to the rally, I explained how these prolonged, grinding melt-ups eventually tip over in a comment posted to a Thursday article. I’m going to cite my own comment here, because I think it’s worth broadcasting the main points to a wider audience.

In terms of sequencing, the first step sees the systematic go-forward turn asymmetric, which is to say systematic strats like target vol and CTAs wind up with more to-“sell” in adverse circumstances than to-“buy” on a continuation of favorable conditions. We checked that box in late-August. Systematics, and particularly vol control, are maxed out. And as the second figure above shows, rVol ain’t goin’ any lower.

“Vol control strategies which take cues from the realized volatility market have already increased exposure substantially,” Citadel’s Scott Rubner said, calling the exposure add since April “one of the sharpest rebounds in equity exposure we’ve seen.”

Going forward, there’ll be “no incremental demand from vol control,” Rubner wrote. “Equity vol is no longer heading lower [and] the crowded short volatility trade is an asymmetric risk if shocks emerge.”

By and by, discretionary positioning will get stretched too. It’s not stretched currently, but it will be eventually because people get tired of under-capturing a rally that’s minting new records every third session or so. That exposure (the eventual build up of discretionary longs) will need to be hedged, and that client hedging will manifest as negative market maker convexity risk on the downside with dealers short puts to end users.

If and when something comes along and stuns the market (the “shock” Rubner mentioned), pushing spot down towards those put strikes, dealers’ hedging flows will amount to selling into weakness. At that point, you get exaggerated price action which, in addition to catalyzing CTA selling as the index careens through key “trigger” levels, flipping momentum signals, the wider distribution of daily market outcomes will embed a latent sell impulse for vol-scalers “who” will be unemotionally de-risking on a delay as trailing realized vol resets higher on the “math” from outsized spot moves.

As I wrote Thursday, none of that’s necessarily a prediction of doom. That whole chain of events could play out in very benign fashion — e.g., a quick 5% swoon, or a 10% correction that quickly reverses as Pavlov shows up to buy the equity dip and sell the vol rip. (It’s been 114 trading days since the last 5% setback for the S&P, by the way.)

All I’m saying is that we’ve seen this movie over and over again post-GFC, and it’s going to be re-screened at some point over the next six or so months. And in more or less exactly the sequencing described above. It’s a foregone conclusion.

But there are countervailing forces (read: countervailing flows) and there’s also a favorable seasonal coming up. As Rubner wrote, in the same note, retail demand continues to accelerate, buybacks will resume as the earnings blackout fades later this month, passive flows are unrelenting (as illustrated above) and a “year-end FOMO rally’s likely” (that’s the seasonal).

So, whenever something shocks the market out of its somnolent melt-up, it needn’t be (and probably won’t be) a disaster or even a bear market. As Rubner put it, things look “fragile” in the near-term, but the bull run has structural elements. “Geopolitical and trade frictions, plus shutdown risks, linger as exogenous shocks,” he wrote, adding that “market breadth remains the key tell [with any] broadening supporting durability, and Mag7 concentration signal[ing] fragility.”

Stocks, he went on, “sit at a pivotal inflection point [where] the macro hinge remains the inflation–Fed easing trajectory.” At the same time, “execution on AI and Q3 earnings [are] equally critical.” The mega-cap market leadership, Scott emphasized, “must deliver against high expectations to sustain stretched multiples.”