April may have brought some partial relief after two grim months but if anybody was in doubt that investors are in several minds, yesterday’s price action on Wall Street should have sorted them out. The VIX volatility/fear index opened at 15.97 and closed at 16.27 showing a ‘modest’ rise of 1.25% but along the way it drifted down to 15.43 before surging to 18.66, making the day’s range an eye-watering 21%. This follows several wild swings during April and seems linked to the demise of the ‘short the dollar/ long in Tech’ sure bets that made so much money in 2017.Tech recovered some of its poise by the end of April thanks to strong Q1 corporate earnings but the dollar has kept climbing. Momentum traders did latch on to ‘long Oil/short US Treasuries’ with the former doing very nicely but the latter’s proving a bit of a damp squib as long-term investors scoop up cheaper bonds.  Chasing yield is becoming riskier and that may be no bad thing. US equities remain, however, the pace-setters and here are three inter-related charts that are currently spooking investors. My own guesses are below each chart.

As the Fed stops replacing maturing bonds (while hiking rates) how high will US Treasury yields rise?

My guess: not a lot further for the time being as long-term buyers move in.

How can a portfolio be hedged if stocks and bonds move together, up or down?

My guess: macro hedges would not work. Better to stock-pick.

Will Fed rate hikes really pull up the dollar and hit equities in the US? What about Emerging Markets?

My guess: dollar strength may well not persist but if it does then bad news for Emerging Market assets.