Stocks reacted terribly, but we think we will see another bounce back up.
In our view, stock investors clearly did not understand the situation, while bonds, as usual, got it right.U.S. government bonds have seen a downward reversal in yields almost all along the curve, reflecting slowing inflation and LESS rather than a more aggressive Fed.
Note that Brainard mentioned slowing inflation in her speech as well, which is a good sign.That's why we think the current plunge is another chance to short-term stock buying.The 2-year yields are clearly on a downward trajectory and the recent horrible, but not horrible-horrible inflation data reinforces the idea that the 2-year yields are due for a pullback after their epic run-up. The 10-year yields will follow, which is a plus for tech stocks and currencies like the Japanese yen and Swiss franc.