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Market Pullback Overdue; Lots of Cash Still On the Sidelines

It was a painful week, with equity markets down 5%. But a big pullback was overdue, given the extended and relentless rise. The natural question is whether this is the start of a broader sell-off.

If so, the one thing to be mindful of is: who needs to de-lever? There are still tons of cash on the sidelines and CFTC positioning data shows institutions are largely risk-off. Sentiment is still weak. The only constituents really bullish are Robinhood investors (Millennials), as retail broadly is bearish, particularly Baby Boomers. There is not a lot of de-leveraging that is needed. Plus, credit is holding up reasonably well and supports equity valuations.

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