Bond Yields Spiraling Downward

What does the bond market know that the equity market doesn't? The yield on the 10-year Treasury is down from 4.25% on October 24, 2022 to 3.29% today. The S&P 500 is up 8.0% over the same period. Bond investors must believe that the banking crisis will soon morph into a credit crunch and a recession, so inflation will continue to fall perhaps even more rapidly than widely expected.

If so, then the Fed should be done. If the Fed persists with more rate hikes that would surely cause a credit crunch and a recession. Deflation might be the outcome of that dire scenario. Lower bond yields may be giving some support to the valuation multiples of various technology stocks for now, but a recession would surely revive last year's bear market in stocks (chart).