US Equities: The Index vs. Single Stocks

The S&P 500 continues its smooth rally to new highs, yet beneath the surface, factor volatility and hedge fund leverage are at multi-year extremes. Investors are increasingly favoring upside convexity over downside protection, leaving the market vulnerable to a shift from dispersion to macro correlation.

Key Takeaways

• 1.An extreme disconnect exists between calm S&P index-level performance and high volatility in factor, positioning, and single-stock rotations.
• 2.Single-stock put-call skew has collapsed to record lows as investors pay for upside convexity rather than downside protection.
• 3.Hedge fund leverage has reached a 5-year high (323% gross), primarily driven by concentrated AI leadership and factor rotations.

Table of Contents

• 20-Day Volatility on GS TMT Momentum Basket
• SPX Historical Implied Correlation Levels
• Corporate Concentration Has Risen Faster During Periods of Rapid Technological Change
• GSXULOWQ Index (GS US Low Quality) LOWQ vs SPX
• Gross and Net Leverage

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