The economy remains healthy, but rising leverage has left the market increasingly fragile. With growth holding up and recession risk still low, our cyclical macro regime remains firmly risk-on. The fundamental backdrop still supports equities even as speculative positioning becomes more stretched. Leveraged ETF assets have reached a record of roughly $218B after rising around 60% since the end of March. Retail options activity is also breaking records, with nearly half of retail options volume now concentrated in 0DTE contracts. Meanwhile, demand for downside protection has faded. That combination makes the market vulnerable to a sharp volatility event. If momentum breaks, leveraged products would be forced to rebalance and crowded portfolios could begin cutting exposure. An ordinary pullback could become self reinforcing even if the outlook hasn't changed. This is the volatility event we continue to expect in 2026. If growth holds and credit continues to flow, the selloff would clear excess leverage from an otherwise healthy cycle.(Delphi Digital)