Markets Quiet—But the Calm Feels Unnatural
The S&P 500 is hovering near its all-time highs, but the tranquility is starting to feel suspicious. For seven consecutive sessions, the index has moved less than 0.6% in either direction—its quietest streak since December. With inflation data and a pivotal Fed decision looming, traders are preparing for a potential storm after the silence.
“For US stocks to get back to all-time highs, we need to remove uncertainty. That’s not happening yet.”
— Eric Diton, Wealth Alliance
Market Waiting Game: CPI, Fed, and Trade Risks
Despite strong earnings and no major signs of a recession, the market is stalling under macro uncertainty:
- Core CPI for May is expected to rise 0.3% (vs. April’s 0.2%), pushing the year-over-year rate to 2.9%—well above the Fed’s 2% target.
- Fed Chair Jerome Powell faces a complex choice: cut rates to support growth, or hold steady amid sticky inflation.
- Trump’s renewed tariff push adds an unpredictable wild card, with many analysts warning of delayed inflationary impacts.
“We’ve become desensitized to inflation. A hot CPI could still surprise markets.”
— Brooke May, Evans May Wealth
Sentiment Diverges: Risk-On or Risk-Off?
Traders All-In… With No Safety Net
- Fund managers have gone all-in on US equities, draining their cash reserves.
- According to Asym 500, market volatility jumps to 42% on macro event days like CPI or Fed decisions—compared to 29% on average.
Yet Institutions Stay Defensive
- Deutsche Bank reports rules-based and discretionary funds are still underweight equities, indicating room to buy… or flee.
S&P 500 Lags Global Peers
- The index is underperforming the MSCI ACWI ex-US by 12 percentage points in 2025—its worst relative start since 1993.
“Many are ignoring the warning signs, betting everything will be fine. That’s exactly what makes traders nervous.”
— Robert Pursche, market strategist
What to Watch: Key Questions Heading Into Wednesday
- Will CPI surprise to the upside?
- Will Powell acknowledge inflation risk—or hint at September cuts?
- If volatility spikes, will investors buy the dip—or bail out?
With traders positioned aggressively long and macro risks looming, a hot CPI or hawkish Fed could trigger the first real correction in months.