Elevated Dispersion Highlights Market Vulnerability

By Michael J. Kramer of Mott Capital Management

Monday, September 29, 2025 5:26 PM EDT

It was a relatively quiet day of trading. The early morning strength faded by midday, leaving the S&P 500 up just 26 bps.Tomorrow will be more important, with the JOLTS report in the morning and about $100 billion in Treasury settlements, which could put downward pressure on markets if liquidity needs to be raised.

Dispersion remained the theme, with the Dispersion Index still elevated. While it could rise further, it’s something to watch—high dispersion typically coincides with low correlations.

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At 10.5, the 1-month implied correlation index is very low.

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Individual stock implied volatility has also risen sharply in recent weeks, reflecting the broader market’s elevated dispersion, which remains intact.

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In the meantime, realized volatility has remained relatively unchanged over the past couple of days and remains very low. Taken together, this leaves the market in a fairly vulnerable position.

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I wish there were more to say, but end-of-quarter rebalancing may be influencing moves in rates and FX, and I don’t think that’s worth reviewing at this time. Based on today’s levels for the TGA and reverse repo, I estimate reserves are around $2.9 trillion. While they should rebound somewhat on Wednesday, liquidity is clearly not as ample as it has been, and over time, reserves are likely to keep contracting until the Fed ends QT.

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If overall market breadth is any indication of these lower liquidity levels, then the Summation Index, which is likely to decline again today, is a prime example.

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More By This Author:

Stock Market Volatility Floors Tested Amid Rising Credit Spread Risks
Big Economic Week Ahead. Are You Ready?
Dollar Strength Builds As Yields Rise And Liquidity Tightens

This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.

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