Blog: Stock and Bond Markets send Conflicting Signals

As expected, equity risk sentiment fell to lower risk last week. The stock market continues to discount any negative economic developments. The sentiment is that the Fed is going to save the market with up to three rate cuts this year. This has been amplified by Treasury Secretary, Scott Bessent, who reportedly said that by "any model" the Fed Funds rate should be 150 basis points lower. While many analysts on Wall Street said that the models they know (like the "Phillips Curve") would actually call for a rate increase, the stock market continues to expect that the Fed will cut rates three times before the end of the year.