I think a great deal of this situation is narrative based. People are generally terrible at predicting earnings six months out as well as recessions and if we get a major recession it would easily be the most widely anticipated recession in history.

First it starts with higher than expected CPI followed by hawkish fed policy. People learned their lesson last cycle and became worried that rate hikes as in past cycles would cause a deep recession and began adjusting immediately rather than wait for a recession. This is evidenced by the fact that the S&P peaked about four months before the Fed even hiked one time.

That’s a very important point that I think many overlook. When you are completely ignorant of impending danger you are most susceptible to damage. When you’re terrified of getting punched in the face you’re going to take drastic measures to protect yourself and in the process likely not get punched at all.

Meanwhile rates have moved very little in 3 months indicating (to me at least) that the bond market believes rate hikes are ending very soon.