Why This Market Keeps Punishing Caution

Volume 162 - The Week Ahead

Good evening,

The market continued to edge higher last week, although the move was small. SPX finished up only 31 bps, but the behaviour of the market mattered far more than the size of the advance. Equal-weight S&P traded fresh all-time highs, realised volatility continued to cool, and dips were absorbed with ease. It is clear that the recent wobble has been fully digested and the market is beginning to trade with a steadier tone again.

This is my second-to-last Week Ahead of the year. After next week, my attention shifts to the Year Ahead post, which will lay out my stance for 2026. For now, the focus is on the shift that has taken place beneath the surface and what it implies for the final stretch of 2025.

The wobble a few weeks ago created the usual noise. Intraday ranges widened, implied vol spiked, and liquidity thinned at the exact moment forced selling accelerated (though it was to be expected anyway as we were approaching Thanksgiving). That phase has passed. The market has stopped trading like it is fighting supply and has started trading like a market that has completed its reset.