Dip dealers and FOMO fuel: The pain trade lives on

The April tariff bloodbath is already fading into folklore as the tape morphs into full-throttle dip-bidding mode. Europe’s STOXX 600 has clawed back roughly 62 % of its slide, the S&P 500 is halfway to its pre-tariff peaks, and retail traders are storming the options counters like it’s Black Friday—nearly $40 billion in net equity buys last month, the biggest haul on record. Mutual-fund managers piled in behind them, wielding the “Trump put” as a hall pass: politics deferred, policy-uncertainty gauges back to February levels—why not load up on cheap beta?

Meanwhile, the pros are still licking their wounds. Hedge funds, CTAs and vol-control quants are net-exposure shy, sitting at the lows of their 12-month ranges. That underweight dynamic is exactly what fuels the grind higher; as long as smart money isn’t all-in, there’s room for systematic bids to swoop in. Once VIX settles in the high teens, models could deliver another $20–25 billion of firepower, forcing even the most cautious funds to chase the rally. Breadth has flipped from deeply oversold to neutral in just two weeks—technicals are a tailwind, not a headwind.

But let’s not kid ourselves—this is rally-renting, not land-owning. Tariff talks are still a coin-flip; one rogue headline and that vol curve snaps back into panic. Energy’s playing its wild-card hand—remember, Riyadh holds the market-share remote—and macro data are skating on thin ice. If CTAs run out of ammo, there’s a yawning air pocket below. My mantra: ride the melt-up, but don’t marry it. I’ll keep a net-long bias while policy can-kicking dampens tail risk, yet every position has a pre-loaded eject hatch. When this punch bowl tips—and it always does—I’d rather spill a few drops sprinting for the exit than mop up the mess afterward.

Net-net: upside pain trade is alive, unallocated capital is the accelerant, and vol premium still pays the rent. The market is daring us to keep pressing “buy” until something finally snaps. I’m in—just with sneakers on and the getaway car warmed up.