- Investors are struggling with the highest inflation in decades and a still-evolving Federal Reserve reaction function. As a result, rate and equity volatility have become more correlated.
- When rate volatility rises, pushing equity volatility higher, this in turn hurts stocks by reducing the price investors are willing to pay for a stream of earnings.
- While risky assets continue to advance, assets used to hedge risk are struggling. Both Treasury bonds and gold are down as investors wrestle with inflation and the prospect of less benign monetary policy.
For further details see:
Why Stocks Need A Calmer Bond Market