The great rate and dollar debate and what will happen to stocks?

Lets begin with the markets as the dow's winning streak ended as interest rates hit their highest level in seven years. How much of a threat now are rates and the Dollar combined if both keep going up. On the margin credit(bonds) effectively moving up on the balance sheet off the equity. Let me explain , lets say you love a stock and you love the dividend and your looking to own it because you can get a combination of yield (3%) and capital appreciation (3-5%). All of a sudden you can buy a triple BBB bond of that company for 24 months and get between 3.6%-5.0% percent. On the margin what is happening and why the market is stalling here is because institutional dollars, saying wait a minute I don't have to own the equity, I think I will park some money for 24 months and make 3.6-5.0% with no risk. There used to be no alternative to owning equities with interest rates being so low and now there are many alternatives.It is the impact of both of those scenario's with rising rates and the rising dollar on the economy. How much can the economy truely take. Also,how much is the stock market willing to except? I think the data tells us that it can take some more to be honest with you. It is an environment where the investors need to digest the change. So it is not just the move in rates it's what does it mean for growth. To coin a phrase: I think we have gone everywhere and have gone no where this year so far. I believe that the pain trade now is actually higher if you look at the way investors have been acting and I talk to investors every single day. What have they been saying, they are only talking about the pinch points and they have not been talking about opportunity set. To clarify everybody knows that profits are great, everybody knows that the economy is on solid footing. What I think is happening now people are saying what are the threats to that and that is all they are focusing on. And what they have done is to hide in some of the sectors that have worked! If you talk to institutional investors and ask where they are hiding they will tell you Tech and Energy!What I believe your going to see is a rotation ultimately into some of the other sectors that work after we digest all the negatives that are out there. The wall of worry has been rebuilt, you have higher interest rates, higher oil prices,you have trade threats,and you have President Trump tweets. I think all that macro news starts to eventually fade to the background and the fundamentals of this market are broadly intacted.The Russell 2000 record breaker : My thesis is two fold, number one there is no risk of trade wars on the revenues of the small-caps because revenues are 100 percent domestic. The second reason is that I believe that the free cash flow increases as a result of tax reform which has not even been felt by the markets yet. I believe we will see some big upside surprises from many of these companies because there tax-rate was adjusted down from 35% to 21%. I am also convinced that the lifting of regulations has been such a tremendous benefit for these small-cap companies. I believe that there is an obstacle that has been removed with the lifting of regulations which can be a tail wind for multiple years to come. I think that the tail winds will get stronger and why your going to continue to see this space do very well!Have a great weekend everyone,John C. Verducci 111