The stock market sees a soft landing as a near certainty, in contrast with the more circumspect rates market. Equities are more likely to be correct in their assessment, but if not they are about 15-35% above where they should be based on history, leaving plenty of downside. Soft landing or not, they should keep underperforming bonds.
After the monomania of Nvidia, the market can return to the question of which direction the economy is heading in. On that, it’s often said the bond market is a better wind vane than stocks. After all, in 2007 USTs started rallying in earnest several months before equities in the lead-up to the GFC. But bond and rates markets have better-delineated binding constraints than the stock market, given the anchoring of the Federal Reserve’s target rate.
