The market is caught between two poles. At one end are declining yields and lengthening duration which favours growth stocks. At the other end is a recession that has barely started and has not yet hit the earnings outlook hard enough. In the middle is the Fed.
Charlie McElligott at Nomura:
The Fed “got the memo” in a big way it seems, as Committee speakers yesterday grabbed the Rates market by the scruff of their neck and slapped some “inflation hawk” sense into them, with the front-end and UST Yields experiencing a shockreversal due likely “stop-outs” in late-comer “dovish / recession” Longs (largest 1d move in 10Y Treasury Yields in 5 years, ex 2 days at peak of COVID lockdown), all due to a circling of the wagons on the punitive inflation- and labor- backdrop realities making the prior market delusions about big Fed EASING as early as Q1 next year see sharp “come to
Jesus” moment
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