The weakness in equities during the month of June predominantly came from funding stress. I saw a lot of commentary centered around macro factors, which was a bit of a head scratcher because if you were on the institutional side, the color on the Street was crystal clear regarding where the main footprint in equity weakness came from. There were three main factors that ended up putting pressure on equities. The funding issues were strictly on the equity side because, although revcons and box rates were elevated, the repo market remained quite normal. 1) CCAR reports: Bank stress test reports are typically released at the end of June. The numbers are generally reflective of December holdings, but regulators and internal risk teams will often conduct an update during June to ensure balance sheets still look relatively in line before the reports are finalized. It is similar to how an auditor performs one final review of a firm’s balance sheet before issuing the audit. This is standard practice, but there is a natural inclination for banks to keep their balance sheets much cleaner during this time of year, which means certain forms of equity lending begin to tighten, especially when new broad sector leaders are trading at elevated realized vol. This can contribute to the weak seasonal effects we sometimes see in June, and it can become even more pronounced when markets turn volatile. 2) IPO new issuance: One massive IPO came to market, and much of the private wealth community worked with the deal runners to ensure it went smoothly. Many private wealth advisors encouraged their clients not to sell existing equity holdings, but instead to borrow cash to participate in the IPO through the secondary market. In other words, investors were trying to avoid selling current positions while simultaneously using other forms of financing to buy into the IPO. The funding market quickly recognized this dynamic and repriced equity financing accordingly. 3) Leveraged ETF holdings: This one is fairly straightforward. Some leveraged ETFs now hold single stocks that are experiencing very high realized volatility, and the Street wants to be compensated for accepting those names as collateral when lending against them. Put simply, the collateral itself has become more volatile. The result was a perfect storm in which there was meaningful demand for equity financing from several different sources at the same time. The increase in equity financing rates made it much more difficult for balance sheets to outright buy stocks and continue driving the market higher, as we had seen over the previous few months. June has now passed, and those financing rates have come down considerably.