“Relax, it’s just PNL protection.”

That’s what Nomura’s Charlie McElligott had to say Tuesday about what I’ll call indigestion in US equities, where a lot of the momo and meme “stuff” is suddenly struggling amid daily (and by now a bit tiresome) AI bubble warnings.

There’s been “no wholesale shift in macro regime inputs at this time,” McElligott wrote, describing a “bumpy” ride as investors take profits on this year’s winners. “I can always paint a ‘death by paper cuts’ macro list, but honestly, this is just what happens when year-end PNL (i.e. compensation) ‘lock-in’ turns sloppy.”

He makes an important point there, and not just about PNL being synonymous with comp. I’ve been doing this — whatever “this” is — every day for over a decade, and I can’t remember a single time when I wasn’t able to put together a list of potential macro potholes which, when taken together, could constitute a plausible bear case.

In other words, and as Charlie put it, it’s always possible to spin a “death by a thousand paper cuts” narrative. Sometimes those paper cuts have a lot explanatory power vis-à-vis the price action, other times not. Currently, that’s not what you’re seeing, according to McElligott.

Rather — and to reiterate — this is just an “unwind / liquidation / de-grossing / netting-down of previously popular trades” to monetize PNL from those positions ahead of year-end.

What about the outlook? That is, if some folks are calling it a year for 2025, what do they see for 2026? Below, in one quick shot, is McElligott’s take. (Have a chaser handy. To the uninitiated, Charlie’s paragraphs are like shots of liquor to non-drinkers: Exhilarating, but sometimes hard to digest.)

Hence, despite the risk that a combo of 1) wider credit spreads led by mega-cap tech debt issuance and 2) lower flow of corporate buyback demand (due to FCF burn from the hyper-scalers) could act as a major thematic inflection and [a] potential headwind for stocks in 2026 — as well as 3) modest investor ‘hawkish pause’ disappointment with the current Fed messaging into the December FOMC meeting — I’d still say the net 2026 outlook remains tilted bullish for most institutional investors with regard to 1) positive trends on corporate EPS / revenue growth (especially the profitability of hyper-scalers and perception they’ll be able to keep pace with the infrastructure buildout and energy bottleneck issues [and the] view of AI as still ‘early stage’ on unprecedented demand for data center space and GPUs), 2) the perception of US economic ‘Goldilocks’ in the year ahead as inflation continues to normalize, but against 3) supportive fiscal dynamics in the US through the 2026 midterms and 4) easier Fed policy, including the imminent resumption of balance sheet expansion (albeit without swapping into duration — so NOT QE, yet)