Wall Street has abandoned caution as the S&P 500 extended its longest weekly winning streak since 2023 to fresh records, rising 1.4% on the week and widening the advance to nine weeks. According to reports from NDTV, this rally occurred despite hot inflation readings that sent the annual gauge to its highest level in about three years, fresh strikes in the Persian Gulf, and enduring expectations that the Federal Reserve may need to keep policy tight. The gains across risk assets owed less to conviction than to the rising cost of being left behind, with investors who have spent months doubting the rebound finding themselves underexposed. As reported by Bitget, this week's performance marked the longest run of consecutive gains since 2023, with the market setting fresh all-time highs despite challenging economic conditions.
The retreat from caution is clearest in the options market, where the cost of protecting against an ordinary selloff fell to its lowest since early 2025 by one measure, while the cost of insuring against a sudden crash dropped to its lowest this year. As reported by NDTV, skew — the premium investors pay to protect against sharp declines — sank back to levels last seen in January 2025, and demand for deeper tail-risk protection fell back toward its lowest level this year. According to Bitget, the cost of hedging for regular declines has dropped to its lowest since early 2025, while the cost of tail risk insurance for extreme crash scenarios has also returned to yearly lows. Chris Murphy, Co-Head of Derivative Strategy at Susquehanna International Group, noted that "traders are clearly chasing upside protection, but it isn't indiscriminate call option buying. It's those underweighting the AI-driven rally who are supplementing their exposure for upside tail risk."
Despite the broader risk-taking, options positioning in the $68 billion VanEck Semiconductor ETF shows extreme demand for upside, with investors paying unusually high premiums for out-of-the-money calls even after the rally has run. According to NDTV, by SpotGamma's count, 20 of the 25 largest Nasdaq companies carry call prices in the top tenth of their historical range, a level unseen since June 2024. As reported by Bitget, Amy Wu Silverman, Head of Derivatives Strategy at RBC Capital Markets, observed that "many believe that even if a pullback occurs, money will immediately buy the dip. As the old saying goes, 'Hedge when you can, not when you have to.'" The appetite is broad, with traders clearly chasing upside protection after being underexposed to the AI-led rally, paying for exposure to upside tails rather than indiscriminate call buying.
BlackRock has reduced its overweight stance on equities in its $220 billion model portfolio business, cutting exposure from 3% to 1% as US stocks hit record highs following a strong earnings season. The asset manager cited a "generational" earnings season, strong productivity and economic resilience as key drivers of the rally, but warned that upside may be limited going forward. Despite the adjustment, BlackRock remains constructive on equities, particularly themes tied to AI, corporate earnings growth and government spending. The portfolio shift triggered major ETF flows, with billions moving into broad-market and international funds while money exited factor and thematic strategies. BlackRock is also rotating away from long-duration US bonds toward global fixed income and alternative assets, as it reassesses traditional portfolio hedges in a changing rate environment.
For all the risk-taking, investors are not fully committed, with hedge funds and trend-following funds rebuilding equity exposure but long-term buying momentum cooling and retail participation staying light. According to Bitget, Amy Wu Silverman noted that "the buying momentum from long-term funds has cooled somewhat, retail participation remains at low levels, and a large amount of cash is still sidelined." The market is already somewhat crowded in segments, but is not yet at "full entry." The protection that would cushion a selloff has been stripped away just as economic data has softened, with consumer confidence weakening, income growth slipping, and new-home sales falling in April, yet stocks closed at records on reports of a US-Iran deal. As reported by NDTV, plenty of cash remains on the sidelines, leaving the market crowded in places but far from all-in.
