S&P 500: Stocks Climb Despite Diverging Risk Signals and Falling Leverage Costs

The rallied on Tuesday, January 6, rising by roughly 60 basis points and barely eking out a new all-time high. It was somewhat striking to see the market advance on a day when Apple (NASDAQ: ) fell by nearly 2%, while Nvidia (NASDAQ: ) declined by about half a percent.
Most of the strength appeared to come from the semiconductor memory stocks, which feel distinctly late-cycle. When memory chip names are leading the market higher, it naturally raises questions about how much further this move can extend, at least in my view. Really, how many more times can Micron (NASDAQ: ) continue to rise by 10%?
All of this leaves the broader outlook increasingly uncertain. With so many indicators stretched and volatility measures already at very low levels, the market appears to be running on fumes, making the next meaningful move far from obvious.
The fell to 8.3, placing it at the very low end of its historical trading range. Historically, experience has shown that when implied correlations reach these levels, a market turn is often imminent.
Meanwhile, the closed below 8. I would be shocked if the VIX 1-day is not above 15 by the close of trading on Thursday, given that we have a jobs report on Friday morning and a potential opinion from the Supreme Court on tariffs expected later that day.
But don’t worry—the bond market apparently does a better job of preparing for event risk, as the has risen over the past couple of days.
Meanwhile, BTIC S&P 500 Total Return futures (EFFR), or equity financing costs, have melted down, with the January 2026 contracts now trading below 60. Again, experience has taught us that the cash market tends not to perform well when declines of this magnitude occur.
The index has been range-bound, gaining less than 1% from its October 29 closing high, and the setup still looks very similar to what we saw at the start of 2022 and 2025. The 1966 track is not dead yet, either.
If correlations were higher, financing costs were stable, and volatility was higher, one could argue that another surge is imminent—and that may still prove to be the case. However, it would also require volatility metrics to be compressed even further, and I cannot handicap those odds.