Financial markers are on shpilkes. Stocks, after crushing it Monday, with the Dow up almost 3%, gave back about half those gains the next day, dragged down by a tech sector spooked by potentially forthcoming regulation around data privacy.

Readers know I don’t try to explain daily ups and downs in equity markets. My mantra remains: the stock market ain’t the economy, and the latter, which matters a lot more important for many more people, remains pretty solid. But is there anything to be learned from this latest bout of market volatility?

Clearly jitters about a trade war are in the mix, as are higher interest rates. It’s that last bit that interests [sic] me, as for years, the cost of borrowing was uniquely low, both here and abroad. As that changes–and we’d certainly expect rates to be rising this deep into the expansion–it introduces some new dynamics both in financial markets and the real economy.

Higher rates are partly due to the Fed, of course, as they’re well into their “normalization campaign.” They’ve diligently telegraphed their every move, so little surprise there. Other rates tied to the Fed’s, like mortgage rates, are going up as well, and that’s weighed a bit on mortgage lending and refis. But rates still remain low, historically speaking–the Fed’s now targeting an FFR (Fed funds rate) of just 1.25-1.5%–and inflation remains below the Fed’s target. The job market is particularly solid, and real US GDP growth continues to wiggle about its long-term 2% trend.

So, WTF (that’s “why the face?”), markets?

Well, there are a few anomalies in play. Despite rising rates, which should boost the value of the dollar, it’s been on a slide. It rallied a bit today on some weak European data, but a closely watched dollar futures index is close to a 4-year low. To be sure, a weak dollar is a positive for exporters, though if our trading partners retaliate with tariffs of their own, trade flows could take a hit (I’m pretty skeptical of that outcome; so far, it’s mostly been bluster, noise, confusion, and uncertainty; not helpful, of course, but not macro-economically important…yet). But currency risk is in the mix.

Another anomaly worth watching is the Libor running ahead of the FFR. The Libor–the rate at which international banks lend to each other–is the other main benchmark interest rate in the global economy, and as the figure shows it (that’s the 3-month Libor) closely tracks the FFR. Yes, the Libor spiked relative to the FFR back in the Great Recession, but that was a function of pervasive and well-founded fears over credit risk, while the Fed was quickly taking the FFR down to zero.

Why is the Libor ahead of the Fed now? I don’t know, but it’s raising the cost of debt servicing more than expected for lots of banks and businesses that borrow in the short-term debt market.

Rising yields across the maturities in the yield curve–the 10-year Treasury yield is up about 50 bps this year–are also putting pressure on stocks, as skittish investors who can’t take the heat finally view fixed income investments as a viable alternative. Speaking of the Treasury, they’ve got to pretty massively increase the supply of bonds to the market to fund the deficits induced by the tax cut and spending bill, which puts downward pressure on bond prices and upward pressure on yields. Of course, that also makes servicing our growing public debt more expensive.

Again, I wouldn’t read too much into all this market volatility. After a long, strong run, equity investors are spooked by growing uncertainty, political cray-cray, interest rates coming back from the dead (though still historically low), a new Fed chair, and who knows what else? Over in the real economy, jobs and moderate wage gains continue to support solid spending and steady growth not just here, but in most countries across the globe. Recession probabilities, for what they’re worth (not much), remain low.

So, as usual,  don’t pay too much attention to the market swings, but do keep an eye out for unusual developments, like the Libor>FFR. Watch the interest rate. It’s a key price in any economy, and after a long hiatus, it’s finally on the move.