The Correlations are Breaking- And Liquidity Explains Why

This doesn't fully resemble a typical risk-off setup

Oil is elevated- yet tech has been pushing higher
Energy is not fully confirming this move
Volatility has been coming down
And the dollar isn't breaking out

In a typical geopolitical shock you would expect,

Oil to rise
The Dollar to strengthen
Equities to come under pressure

That's not fully what we're seeing

So what's changed??

Positioning.

Over the past month, investors appear to have aggressively de-risk, raising cash and reducing exposure across asset classes

As worst case scenarios appear to be stabilizing, there are early signs that capital may be rotating back into the markets

But not evenly, that's the key

When liquidity returns it flows first into areas that were oversold or heavily hedged rather than across the board

Thats why:

Tech is showing signs of recovery
Energy is lagging
The dollar isn't confirming
And oil can remain elevated without driving a broad risk off move

Markets dont shift when the story becomes clear, they shift when positioning becomes uncomfortable.

After a period of forcing de-risking, investors do not suddenly turn bullish- they just stop needing protection

Thats when capital starts to move again

And it doesn't move evenly, Thats how correlations can begin to break.

[/I]This is market commentary for informational purposes only and should not be considered financial advice