Equities follow a repeating cycle of crisis periods created by monetary policy. If each cycle ends with a higher stock market and produces VIX profits, then a strategy using these pieces in combination should end up ahead over time. This is precisely what has been observed with Tactical Beta since its inception nearly seven years ago… we expect this cycle to ultimately end profitably like the others before.

The return of the market’s fabled “bond vigilantes” threatens to remove a significant source of economic support just as stress from rising rates is growing extreme.

To us, this month confirms that interest rates are the main source of risk for equity markets. While stocks can’t seem to tolerate higher rates, any rate decline must also be benign… it seems as though the Fed’s “landing pad” is very narrow indeed.

Apparently confident that those who let inflation loose have now contained it without a recession, markets are nearing a critical juncture where this assumption is tested by reality.

Powered by “AI” optimism that has turbocharged a handful of the largest stocks in the world, markets are certainly giving the appearance of strength so far in 2023. As greed overtakes fear once again, it is worth noting that emotional markets (on the way up or down) often create allocation errors as the larger context is ignored.