The 2022 bear market and the 2023 rally broke almost all of the rules of the downturns and recoveries of the last 30 years. With rate cuts now widely expected in 2024, markets are quickly approaching a major fork in the road.

With asset prices soaring in November and a soft or no-landing scenario now the overwhelming consensus for 2024, stocks seem to be fully pricing a happy ending to the steepest rate hike campaign in the last 50 years.

As we have repeatedly suggested, the best time to own a crisis-focused strategy is just ahead of the next crisis. History suggests that we may now be on the precipice of one.

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.