Hey community 👋, we've got a critical market update drawing from recent financial research covering everything from US rates and volatility to the AI investment landscape in both the US and China 🇺🇸🇨🇳. Here's what you need to know about the current macro flow and the underlying drivers of risk and technology adoption: 1. The Macro Backdrop: Expecting Cuts & Easing Conditions 💰 The US outlook is currently viewed as murkier than many think, supported by alternative labor data suggesting the economy may be losing momentum. This slowdown, however, may be necessary to set the stage for a more market-friendly environment. - Rate Cuts Expected: Goldman Sachs (GS) anticipates a rate cut in December ✂️. Following this, the US economics team expects two additional cuts next year, taking the funds rate to 3-1/8% by the middle of next year. - Bull Market History: Historically, bull markets do not end with cutting cycles 📈. - 2026 Outlook: The market backdrop is projected to turn "far more market-friendly" in 2026 once tariffs fade, tax cuts arrive, and financial conditions ease further 🎯. - Volatility: Equities (NDX) and bond volatility (MOVE) continue to move in perfect tandem 🎭. 2. Risk Appetite and Market Flows 📊 Sentiment indicators show investors are cautious, even as markets manage to bounce: - Low Risk Appetite: Goldman's risk appetite indicator is currently registered at rather low levels 🔻. - Timely Positioning: Investors managed to ditch calls relative to puts just in time for a recent market bounce ⏰. - Market Rotation: Professional investors, including both hedge funds and "real money," have recently shown a significant rotation into healthcare 🏥, selling off tech positions 💻. Despite this rotation, experts advise remaining structurally long US tech but preparing for the outperformance gap versus the rest of the market to narrow. 3. AI: Productivity Gains and the Infrastructure Arms Race 🤖⚡ The commitment to AI adoption by large corporations is immense, driving massive investment and projected productivity benefits: