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.

As sector rotation has so far kept a lid on index volatility in 2023, VIX headwinds from the options market have been abating as both “skew” (the price of puts relative to calls) and the price of tail protection have quietly reversed much of last year’s weakness, setting up better potential for VIX movement once conditions change

For almost a year now, most TCM strategies have been profitable even as they have been defensive and trailing their benchmarks… this is an indication that crisis conditions are becoming more frequent and from the appropriate “inside out” perspective, suggests an outstanding opportunity ahead for TCM’s positively skewed strategies.