Aside

Last week we shared how the Bloomberg World Interest Rate Probability Indicator reading reached the 100 percent level for a rate increase at the March 15th FOMC meeting. (See Beware The Ides of March) While we pay close attention to WIRP, it's not the only data point pointing towards higher interest rates.

While stocks are off to a strong start this year, most bond indexes are down and the risks for bond investors continues to grow. The culprit? Rising interest rates.

The current rally in U.S. equities is quite extraordinary. New all-time highs, falling volatility and broad sector participation are just a few of the characteristics of the rally that started in November 2016 and continues today. The current momentum is especially interesting considering it was born in the backdrop of a highly-contested U.S. election, and endured a December 2016 interest rate hike by the U.S. Federal Reserve, just the second such rate hike in 10 years.

Economic imbalances, anemic global growth and the bursting of the commodity super cycle has created a challenging environment for over-levered companies, a climate strikingly similar to 2008.