Conviction Only Matters When It’s Tested

This month: When the futures curve flips, it’s not just a volatility event—it’s a perception reset. Let’s talk about what backwardation means for capital allocators and communicators alike.

When the Market Sells Certainty

Today’s market action is sending a clear signal: volatility is no longer a side effect—it’s the story.

The S&P futures curve slipped into backwardation for the first time in over a year, with short-term contracts now trading above longer-dated ones. That inversion might sound arcane, but its message is loud and clear: investors are pricing in elevated near-term risk and uncertainty. In other words, markets aren't just predicting volatility—they’re demanding a premium for it.

Backwardation in equity index futures is rare, but when it shows up in equity volatility markets, it’s often a precursor to sharp swings in asset prices—or the aftermath of news that's tough to price quickly, like yesterday’s sweeping tariff announcement.

Here’s what matters for leadership teams:

Volatility doesn’t just move prices—it moves perception.

It affects how investors evaluate your risk profile, discount your cash flows, and compare you to peers. A market in backwardation is more sensitive to narrative shifts. That means a stronger premium on credible messaging, well-managed expectations, and the ability to help investors make sense of the chaos.

This is where I see companies get it wrong: they treat volatility as external. But in markets like this, perception of resilience becomes part of valuation. And that perception is shaped by what you say, how you say it, and how consistent you are.

Price Discovery on Fast-Forward

Volatility gets a bad rap—as if it’s purely emotional or irrational. But it’s often just a form of accelerated price discovery. Fundamentals, perception, and positioning collide, and markets try to figure out what still holds true.

For issuers, the opportunity is to re-anchor the narrative. When visibility narrows, investors don’t want spin. They want signal.

For investors, this is where preparation matters. If you’ve done the work, built your watchlist, and know what great businesses look like when they’re temporarily misunderstood—this is your moment.

The Watchlist Mindset

In January 2019, I bought shares of NVIDIA after a rough earnings reset brought its P/E below 20. Sentiment had soured. The headlines were loud. But underneath it, I saw a business I understood and believed in—at a price that reflected value.

I didn’t nail the bottom. I didn’t have a crystal ball. I just knew it was a company I wanted to own, and I’d done enough thinking ahead of time to recognize the opportunity when it came.

That’s the kind of discipline investors need in markets like this.

Volatility is only useful if you’re prepared to act on it. Not with guesswork—but with conviction you’ve already earned through research and reflection. It applies to managing capital, and it applies to managing communication: know what you stand for before the stress test hits.

Signal vs. Noise

Backwardation ≠ doom. The inversion in the volatility curve signals uncertainty, not inevitability. It’s often short-lived—but worth watching closely.

Leadership: Lean in with clarity. The best investor messaging during volatile periods isn’t defensive. It’s deliberate. Offer context, acknowledge uncertainty, and reinforce what hasn’t changed.

Investors: Prepare to act, not react. If you’re building your conviction during the selloff, it’s already too late. Make the decisions before the dislocations.

One Last Thing

Someone asked me recently how I’m navigating this market. The truth is, not much differently than before. Because the real work happens between the headlines.

In both capital markets and communications, the winners are rarely the flashiest or fastest. They're the ones who prepared with discipline—and moved with purpose when the moment came.

If this letter resonated with you—or you just want to keep our conversation going—I’d love to hear from you.

Until next month,

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Zachary Graeve
beacons.ai/zacharygraeve