Concentrated Gains in US Stocks Weigh on Risk Assets

The US stock market's recent gains have become increasingly concentrated, with technology-heavy stocks leading the charge. The S&P 500 was just under 1% below its record high as of September 25, but its equal-weighted index had declined about 4% for the month.

This disparity in performance indicates that borrowing costs are weighing heavily on a broader group of companies, while improved expectations for near-term rate policy are supporting risk assets.

For a sustained recovery in risk assets, long-term bond yields would need to ease. A decline in short-term yields alone may not be enough to relieve financing pressure if longer-term yields remain elevated.

Crypto markets have continued to receive support from spot ETF demand, although the pace has weakened. U.S. spot Bitcoin (BTC) ETF inflows totaled about $2.386 billion from September 21 through September 25, with daily inflows falling from $999 million to $135 million across the five trading days.

The coming days will be critical in determining whether ETF inflows continue while the dollar and bond yields stabilize. If ETF inflows turn negative while contract open interest continues to expand, any decline could be amplified by liquidations.