1/x So why did this extreme rotation happen the last 2 days? The benefits to economic growth for value stocks is obvious.BUT WHY A ROTATION & NOT A BROAD RALLY? I’ve put out a lot of commentary about how the increases in econ growth expectations that the vaccine & fiscal stimulus https://twitter.com/stevekavdc/status/1326534987991015435

2/x cause are bad for the duration trade & multiples. I’ve been pounding the table on this for quite some time. But it’s important to note that these fundamental threats to growth still come w/ a lot of potential caveats, are far from certain given the likely political landscape

3/x @ this juncture, & will likely play out over years/decades, not days or months...SO WHY?! The answer is simple. As I’ve explained before, & I worked w/ @choffstein to help him enumerate in his fabulous piece ‘liquidity cascades,’ when index IVol is compressed, as it is now,

4/x & idiosyncratic risk forces constituents of the index in 1 direction, in order for the index to stay pinned, due to the forces of arbitrage, there must be an equal & opposite move by the other remaining constituents of the indices in the other direction...

5/5 Vol markets in the indices are now macro dominant.They’ve been increasingly so for 2 decades & have been firmly in control of price action since 2014-15. It’s not a coincidence that we’re seeing more 6 sig+ moves relative to history. These aren’t your father’s equity markets