The VIX – Yield Curve Tool is an interesting study by the CME Group on the relationship of VIX and the Yield Curve to validate the current phase of the economic cycle.

As the Fed has begun to unwind Quantitative Easing (QE),  interest rates are starting to reflect a market-driven reality.  With this recent event, the tool shows the US economic cycle to be in the late stages.

While this tool is handy for planning and a visual aid to investment committees, it lacks the one element every manager has yet to find. The when and why of the tipping point into a recession.

While no tool will tell us that, the downside capture will be lessened if it helps with risk mitigation.