We finally get barely a 3% pullback and now the market is kind of trading in that range into size. Yeah, we've been stuck just within that range. And I think Friday was a bit of a wake up call as to how much leverage there was built up in certain pockets of the market. So certainly within Bitcoin, but as well as within the speculative high beta stocks, you certainly saw big huge downside moves. But you're still in an environment where you have a positioning chase that we think could continue on. You're just in the 74th percentile of overall that Deutsche Bank consolidated positioning. You have earnings that are coming in strong and you have earnings estimates that continue to rise. Liquidity still appears to remain abundant, maybe Bitcoin is possibly calling that into question. So it means that possibly we continue this drift higher, but it's not necessarily a straight line up.

I think it comes down to something we think fairly simple, which is that when we get new headlines across the tape. Do we have that challenge the current earnings consensus? Does trade headlines challenge us to make us revise our estimates in any way? And if the answer is no, it means that it likely is something to be faded. So we've been operating under this simple rule is that if the 12 month forward earnings estimate continues to make new highs, the S&P 500 probably will continue to make new highs as well.

To look within the index. Yeah, I think it is incredibly important because we talk a lot about the K-shaped economy when it comes to the consumer within the US, but there's very much a K-shaped that's happening within the overall equity market, which is that what's driving the earnings revisions higher is coming from this small handful of AI names, plus the banks, those two areas have been very strong. But you look at this rally within something like small caps and you're actually still cutting estimate revisions. So small caps have risen by 45% since liberation day. We've actually cut earnings estimates for 25 and 26 by 10% since liberation day. So the small cap rally isn't necessarily anything based on fundamentals. It's just probably more something on positioning.

Yeah, and if we wanted any evidence for why this is an abundant liquidity environment, we'd say look at the junk, look at the high beta, look at the more speculative parts of the market, clearly there's this appetite for risk. And so if those things start to fade, it could be ushering in potentially a new leadership phase of this market. We would think that at the end of the day quality over the long term cycle does win out. You typically see these big low quality rallies that tend to reverse themselves. But high beta has held in a heck of a lot stronger than we were expecting at least in the last month, given how strong it was coming off of the low.

Your take on an AI bubble in the making and AI bubble that's here is it relevant to talk in bubble terms? Well, we think that you can have a bubble in earnings just as much as you can have a bubble in valuations. And I think that's an important point because if you look at some of the valuations of the AI-related names, not necessarily those quantum natives, but just our kind of classic Mag7 AI names, they're not necessarily in bubble valuations. However, they have had super normal earnings growth. So I think the biggest question, 2026, is the CapEx is set to slow. We all know this is the law of large numbers. Will the market care about that CapEx growth rate slowing? That's second derivative slowing. And will that cause people to kind of reassess this up into the right kind of super normal trajectory of extrapolating huge earnings growth for all of these players.