Core Viewpoint - The U.S. market is experiencing an unusual calm ahead of the Federal Reserve's decision, with low levels of the VIX and MOVE indices indicating reduced volatility expectations [1] Group 1 - The VIX, a measure of market volatility, has dropped to low levels, suggesting a lack of fear among investors [1] - The MOVE index, which tracks bond market volatility, has also decreased, indicating a similar trend in the fixed income market [1] - Analysts warn that this calmness is fragile due to internal policy disagreements within the Federal Reserve, which could lead to a split vote [1] Group 2 - Potential hawkish rate cuts or deteriorating employment conditions could quickly trigger a new wave of market volatility [1]

Core Viewpoint - The current market calmness is fragile, with potential volatility looming due to diverging views among Federal Reserve officials and concerns over a weakening labor market [2][4]. Group 1: Market Indicators - The VIX index, a measure of market fear, is hovering near its lowest level since the beginning of the year, while the MOVE index has reached its lowest point since early 2021 [1]. - Recent economic data, including a consumer inflation report that met expectations, has led traders to anticipate a rate cut by the Federal Reserve next week [2][4]. Group 2: Economic Conditions - The latest inflation indicator favored by the Federal Reserve rose by 0.2%, keeping year-over-year data below 3%, indicating persistent inflationary pressures [4]. - Concerns about a weakening labor market are growing, with the highest number of layoffs reported since early 2023, according to ADP Research [4]. Group 3: Investor Behavior - The S&P 500 index rose by 0.3% this week, nearing historical highs, while the Nasdaq 100 index increased by 1% [7]. - Investors are increasingly moving into equity markets, with U.S. stock funds experiencing inflows for twelve consecutive weeks [7]. Group 4: Risk Management - Despite the current low volatility, there are signs of caution, as the amount of money flowing into money market funds reached a record high for a single week [8]. - Tail risk hedging products have shown some strength in 2025, but their significant gains have not been maintained through recent market turbulence [8].

Core Viewpoint - The market is experiencing an unusual calmness with low volatility indicators, such as the VIX and MOVE indices, near their yearly lows, despite recent fears and fluctuations in AI stocks and credit markets [1][2]. Group 1: Market Sentiment - The VIX index, a measure of market volatility, is hovering near its lowest point of the year, while the MOVE index has reached its lowest level since early 2021, indicating a significant drop in fear among investors [1]. - Just weeks ago, the market was filled with panic, particularly around AI stocks, which saw a rapid rise and subsequent fall, leading to increased volatility in stock and credit markets [2]. - Investors are currently betting on the continuation of this calm state, with U.S. stock funds recording inflows for 12 consecutive weeks [2]. Group 2: Economic Data and Confidence - Stable economic data is a key reason for the current market calm, with the Fed's preferred inflation measure showing a monthly increase of 0.2% and an annualized increase slightly below 3%, indicating persistent but stable inflation pressures [3]. - Despite signs of weakness in the labor market, such as the largest layoffs since early 2023 reported by ADP, confidence in economic resilience is supporting the low volatility environment [3][4]. - The potential for increased layoffs could change the current sentiment, as rising unemployment may reflect greater recession risks that have not yet been priced in [4].

Core Viewpoint - Bank of America’s chief investment strategist Michael Hartnett indicates that nearly all proprietary trading signals have issued sell signals, despite a record bullish reversal among fund managers following three months of panic selling [1] Group 1: Sell Signals - The cash rule from Bank of America’s fund manager survey shows that cash as a percentage of assets under management (AUM) is at 3.9%, reaching sell signal levels. Historically, similar sell signals have led to an average decline of 2% in the S&P 500 index [2] - The global breadth rule indicates that 64% of MSCI global stock index components are trading above their 50-day and 200-day moving averages, down from 80% last week, but not yet at the 88% sell signal threshold [2] - The global fund flow trading rule shows that inflows into global stocks/high-yield bonds account for 0.9% of AUM over the past four weeks, down from 1.0% last week, triggering a sell signal [2] Group 2: Market Conditions - Hartnett suggests that those looking for sell triggers should focus on the bond market rather than the stock market, emphasizing that "bears watch bonds, bulls watch stocks" [2] - The 30-year U.S. Treasury yield remains at a critical level, having briefly surpassed 5% during a mini-panic when the market speculated on Trump firing Powell. However, as long as yields do not reach new highs and the MOVE index stays around 80, the market maintains a "risk-on" status [2][3] Group 3: Economic Indicators - If long-term Treasury yields reach new highs and the MOVE index exceeds 100, Hartnett will shift to a "risk-off" stance [3] - The current market breadth is collapsing, with the equal-weighted S&P 500 to S&P 500 ratio at a 22-year low, the Russell 2000 to S&P 500 ratio near a 25-year low, and the value to growth stock ratio at a 30-year low, indicating a potential economic slowdown or stock market bubble [3] Group 4: Historical Context - Hartnett draws parallels between the current situation and the early 1970s, referencing Nixon's economic policies and the Fed's rate cuts, which contributed to a boom-bust cycle. He notes that after initial market sell-offs, the S&P 500 rose 11% a year later, suggesting that history may repeat itself if Powell is removed [4]

Group 1 - The recent sell-off in U.S. stocks, bonds, and currency has paused, but market participants remain tense, anticipating potential renewed selling [1][3] - The U.S. dollar's depreciation trend has been halted, with the dollar index recovering from around 97 to the 99 range [1] - The "MOVE index," which reflects expected volatility in the U.S. bond market, remains high at around 105, indicating ongoing market uncertainty [4] Group 2 - The S&P 500 index rose to 5525.21 points, surpassing the previous two-day high, yet the VIX index remains elevated at 24.8, suggesting continued market apprehension [6] - Many investors predict a recession in the U.S. within the next year, despite the stock market not yet reflecting this downturn [6] - The upcoming U.S. employment data on May 2 is deemed extremely significant, as it may influence Federal Reserve interest rate decisions [6][7] Group 3 - The Federal Reserve's interest rate cut expectations for May are around 10%, with June's expectations at about 60%, indicating a cautious outlook [7] - The Bank of Japan is expected to maintain its policy rate, with no immediate changes anticipated unless trade negotiations progress [8]