The rolling 40-day correlation has surged to new all-time highs. While R2000 forward year returns are strong following the few instances that this correlation has crested 0.60, more near-term (i.e. 1 to 3 months) have not. Prior to 2022, this correlation had never exceeded 0.60 and yet has done so in five clustered episodes (Nov-22, Aug-23, May-24, Jan–Feb-25, and now) all of which can be roughly characterized as rising inflation concern regimes. What complicates this heightened correlation is that the R2000 is up 18% YTD while the 7-10 Year T-Bond ETF is down -2%. So, while daily movements have become unusually synchronized, small-caps are gaining more in up days and losing less on down ones. That type of relative performance is also not unusual when the correlation reaches current extremes. This suggests a strong risk-on trade underscored by a combination of rising inflation, strong economic activity and Fed interest rate expectations. But what the recent past argues is that when this correlation crests 0.60, the risk on trade is near-term overextended leaving small-caps increasingly exposed to the same rate volatility that has been hurting bonds.