Market volatility increases despite narrow rally.

The US stock market has been performing well despite negative news, with the S&P 500 up 7.5% YTD. The market's failure to decline on bad news has prompted buying by investors who are underweight equities, inadvertently supporting stocks. This dynamic is called the "pain trade," where a market reversal causes significant losses for those caught on the wrong side. Institutional and retail investors have removed nearly $340 billion and $30 billion, respectively, from the stock market, leaving them underinvested and underperforming. If all the bad things do not materialize, the ability for the stock market to rally remains stronger as it'll be fueled by traders who are underinvested, setting up the market to jump higher.