The Rates Disconnect

The report highlights a growing disconnect between resilient equity markets and surging bond yields driven by inflationary AI capex and oil prices. It suggests that the Fed is falling behind the curve and recommends VIX hedges as volatility reaches a floor.

Key Takeaways

• 1.A massive dislocation persists between the S&P 500 and rising bond yields/volatility (MOVE index).
• 2.AI investment is transitioning from a productivity narrative into a classic, inflationary capex boom.
• 3.The Fed risks falling behind the curve as the US two-year yield trades above the Fed funds rate.

Table of Contents

• The Rates Disconnect
• Rates don't matter?
• Bond vol screaming
• The bonds question mark
• AI is inflationary
• Hike
• Stubborn oil
• Capex inflation
• Falling behind
• Credit risks
• VIX seasonality
• Got VIX hedges?

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