JUL · ISSUE 27 · July 3, 2026

CONTRARIAN

Fear on top, record liquidity underneath

The fear gauge reads fear just as cash on the sidelines hits a record and small caps make all-time highs.

FEAR / GREED

in the FEAR zone

M2 LIQUIDITY

record

>6% a year, accelerating

SMALL & MIDCAPS

highs

Russell and MDY at ATH

THE NUMBER

>6%

= annual M2 growth, the fastest since the pandemic

The money supply (M2) is at a record and accelerating, with the largest monthly rise on record in May. Meanwhile fund managers have cut their US equity exposure at a historic pace. Fear in the sentiment, fuel in the tank.

THE NUMBER

ZOOM IN

>6%

▲ annual M2 growth, with a record monthly jump in May

There may be fear in the headlines, but there's more money on the sidelines than ever, waiting for its moment.

M2 measures the money available in the economy. At a record and accelerating, it's the fuel that tends to hold markets up while the central bank leaves it in place.

MONEY SUPPLY: — The total money circulating and held in accounts within an economy.
CENTRAL BANK: — The Fed in the US. It can add or drain liquidity from the system.

QUOTE

AUTHORITY

When everyone gives up at once

“When fund managers turn bearish all at once, it's usually the buy signal, not the sell signal.”

Michael Hartnett · Chief Strategist · BofA Research

Fund manager surveys show equity exposure cut at a historic pace. The pessimistic extreme tends to come before the rise, not the fall.

EXPOSURE: — How much money a manager has invested in stocks versus in cash.
CONTRARIAN: — Going against the consensus when it reaches an extreme.

SENTIMENT

SCHEMATIC

From greed to fear in a few months

JANMARMAYJUNJUL

Extreme fear doesn't guarantee a bottom, but historically it's been a poor time to sell and a good time to keep a shopping list.

A schematic of the fear and greed index sliding into today's fear zone (29). The current level is real; the path is illustrative.

NEUTRAL: — The 50 mark of the index, where neither fear nor greed dominates.
BOTTOM: — The low point from which a price bounces and the trend turns.

WHY IT MATTERS

THREE SIGNALS

Three things the fear is hiding today

EXTREME POSITIONING
Fund managers have cut equities at a historic pace. When almost no one is invested, a lot of money is still waiting to come back in.
RECORD LIQUIDITY
M2 is at highs and accelerating. As long as the central bank doesn't drain that liquidity, the undercurrent pushes higher.
BREADTH, NOT NARROWNESS
The Russell 2000 and midcaps at all-time highs debunk the story of a seven-stock rally. More of the market is rising than it looks.

The headline is fear. Underneath sit three signals pointing the other way.

POSITIONING: — How much risk the big money already holds. An extreme tends to reverse.
BREADTH: — How many stocks actually rise, beyond the index's biggest names.

EXAMPLE

STANCE

An example stance for the contrarian playbook

BROAD INDEX40%

The wide market, not just mega-caps

SMALL & MIDCAPS25%

Where the breadth is, at highs today

CASH (FUEL)25%

T-bills near 4%, ready to deploy

GOLD10%

Decorrelates from equity risk

The disciplined contrarian doesn't buy all at once. They use fear to scale in and keep dry powder.

This is NOT advice. It's an example of using fear without betting it all, keeping fuel in reserve.

FUEL: — Reserve liquidity ready to invest when the opportunity appears.
SCALE IN: — Buying in several steps instead of all at one price.

WATCHLIST

5 TO WATCH

Five tickers to read the breadth

IWM	ATH	▲ +	US small caps. At highs, proof that more than seven stocks are rising.
MDY	ATH	▲ +	Midcaps. Also at highs, reinforcing the breadth signal.
RSP	-	▲ +	Equal-weight S&P. Measures the market without the mega-cap weight.
SPY	-	→ →	The classic S&P. Flat while the rest of the market rises underneath.
BIL	~4%	→ →	Short-term T-bills. The fuel waiting on the sidelines near 4%.

If breadth rules, these five show it better than the S&P. Four measure the broad market, one the dry powder.

EQUAL-WEIGHT: — An index where every company counts the same, with no mega-cap dominance.
T-BILLS: — Very short-term government debt, a yielding shelter while you wait.

WRAP-UP

Did this briefing help?

If it made sense of why fear and record liquidity coexist, share it.

One carousel a day, Mon-Fri. Tomorrow another story, another concept.

Daily briefing · Mon-Fri 16:00 ET

M2: — The money available in the economy.
CONTRARIAN: — Going against the consensus when it reaches an extreme.

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