Financial markets are upside down. Financial repression and belief in the “Fed put” pushed investors further and further out the risk curve over the past six years. Too many asset managers have remained fearful of underperforming peers and benchmarks; a powerful incentive to stay ‘risked-up’. The psychology of bullish, and faith in Fed abilities, have been too firmly embedded in the investor class. Given that markets don’t seem to want to believe that a June hike looks probable, we expect an outsized market reaction to a hike, lower long yields to accompany it, a flatter curve, wider credit spreads, higher market volatility, and materially lower equity markets.