Equity markets have shown remarkable resilience in recent times, with the SPX barely falling yesterday and futures recovering this morning. This could be seen as a sign of strength, as investor sentiment appears to be improving, supporting the core engines of the market. However, the question remains as to how low nets have fallen, how much gross has been cut, and how heavily hedged investors have become.

Despite a hot CPI print, the market struggled to sustain the volatility premium, with VIX briefly trading into the 20s but finishing below 20. This is a telling sign, as it suggests that positioning may now be doing more to support the tape than the macro is doing to undermine it. It raises the question of whether the current resilience is a sign of strength or a false dawn.

On one hand, the improving sentiment and support from positioning could indicate that the market is set for a sustained recovery. However, the extent to which nets have fallen and gross has been cut could suggest that the market is overvalued, and any sign of weakness could lead to a sharp correction.

The truth likely lies somewhere in between. While the market may be overvalued in some areas, there are also pockets of strength and growth potential. The key will be to navigate the complex interplay between macroeconomic factors, investor sentiment, and positioning to identify the areas of strength and potential for growth.

Ultimately, the resilience of equities is a complex and multifaceted issue, and it will require a nuanced and data-driven approach to understand the underlying factors driving the market. Whether the current resilience is a sign of strength or a false dawn, it is clear that the market is entering a period of heightened uncertainty and volatility, and investors must be prepared to adapt and evolve their strategies to navigate these challenges.