**• US Treasury yields rose across the curve, with the 7-year yield up 7 bp (+1.58%) on inflation concerns amid deteriorating liquidity signals.** **• The Kospi surged 8.42% (z=5.07σ), driven by strong buying in tech and financial sectors, indicating a solid risk-on sentiment.** **• Aluminum prices dropped sharply by 7.66% (z=-6.20σ), reflecting overproduction concerns in the face of slowing demand, thus impacting commodity markets.** --- **Recommendations** • Consider adding exposure to Asian equities—KOSPI’s strong rebound may presage continued growth in the region. • Look to short aluminum—overcapacity fears and declining prices suggest further downside risk. • Buy US Treasuries, particularly in the intermediate range, if liquidity conditions tighten further and inflation expectations continue to adjust downwards. --- US markets exhibited a constructive risk-on sentiment during Thursday, May 21, 2026, with the broad Wilshire 5000 index climbing 1.20%. The movement was catalyzed by bullish equities, particularly in technology, where investor appetite surged. Positive sentiment materialized despite ongoing concerns about inflation and global demand. Notably, the Kospi soared 8.42% (z=5.07σ), suggesting that investor interest was ignited by tech and financial sector gains, driving the overall market rally. Meanwhile, US Treasury yields climbed across the curve, with the 7-year yield increasing by 7 basis points to 4.50%. This uptick reflects inflation fears exacerbated by today's liquidity signals, which point to tightening conditions across the financial system. The economic calendar today revealed mixed signals on growth and labor. The Flash Manufacturing PMI in the US dipped modestly to 53.8 from a prior 54.0, hinting at some deceleration in manufacturing activity. Moreover, the economic data highlighted that Unemployment Claims slightly improved, coming in at 209,000 against a forecast of 210,000. However, the overall tone remained subdued as investors weighed these data points against the backdrop of strong inflation expectations. The day saw the 5-year breakeven inflation rate decrease by 7 basis points to 2.59%, hinting at possible easing in inflation pressures, which weighed on Treasury yields but not enough to reverse the upward movement altogether. Bond market dynamics were heavily influenced by the interplay of corporate yields, which witnessed a notable decline. For instance, high-yield bonds saw yields drop by 8 basis points to 5.41%. This decline contributed to a tightening in credit spreads, fostering a more risk-friendly environment. However, as liquidity conditions were reported to be deteriorating (-2.61%), with a negative acceleration of liquidity signals (-0.3433), this backdrop raises concerns about sustainability in such moves. Investors are advised to monitor these liquidity conditions closely, as they could influence market stability in the near term. Sector performance echoed the overarching risk-on sentiment, with the technology sector notably rising by 2.18%, bolstered by key movers such as Amazon (+1.34%) and Apple (+0.86%). The notable recovery in tech shares helped offset earnings-related pressures faced by giants like Nvidia (-1.64%) and Microsoft (-0.48%). Additionally, the energy sector remained under pressure, dropping 1.92% as Brent crude oil prices fell on diminishing demand forewarnings amidst geopolitical tensions. In commodities, the sharp decline in aluminum prices by 7.66% (z=-6.20σ) stands out as an unusual move, indicating concerns around oversupply amid weakening demand. Similar pressures were observed in the broader materials sector. On the positive side, orange juice prices surged +6.34%, indicating potential supply constraints, which may highlight the dual nature of agricultural commodities in current market conditions. The liquidity regime signal currently paints a concerning picture as the composite signal shows deteriorating momentum, which may foreshadow a trend reversal in risk assets in the coming sessions. As evidenced by today's price actions, while equity markets respond positively to growth signals, the caution stemming from tight liquidity and high inflation expectations suggests a need for judicious position management. Looking ahead, catalyst events include the release of the Flash Services PMI and data on Housing Starts, which could further inform the growth narrative. The upcoming week will provide numerous economic indicators that will be pivotal in framing the outlook, specifically for investor expectations around potential Fed rate changes. Overall, the tone remains cautiously optimistic, with a need to balance risk exposure against evolving inflation and liquidity dynamics.