Stocks are off worst levels but still under pressure from rising yields. The 30-year yield hit levels last seen in 2007. We'll discuss the higher yield environment and its impact on fixed income vs equities.

We've had seven weeks of rally looking through major geopolitical issues. Now the focus is on global rates policy and inflation. The UK and Europe signal next rate move is up; US markets predict up, but I think it's down. Yields tell a different story.

Why do you think the next move is down when the market thinks it's up?

The bias of the Fed committee and Kevin Warsh is down, not up, despite recent hawkish commentary. The labor market will be key.

Fed minutes on Wednesday and Nvidia earnings are key events. What matters more?

We're 95% through Q1 earnings at ~17% growth. Micron and Nvidia will be a third of that. AI is a new tailwind for pharma, healthcare, financials, not just energy and hyperscalers. We need to parse how much of market valuation is due to expected lower rates vs true growth and profitability.

We've seen enormous selling of block trades through Treasury futures, pushing yields to levels that forced recent buyers to cut. Asset managers are scaling in but no one is sure. The market is trading disorderly and feels unhinged. The market has repriced the Fed: ~35bps of rate hikes priced by Q1 next year, ~20bps by year-end. A lot rests on how Warsh and the Fed view data in early June.

Despite everything, we have growth. Corporate investors see less uncertainty on tariffs and regulation. The top 10% spend 50% and have seen outsized portfolio gains. If we don't see a cut this year, we'll be rate-neutral for a while. I'd be surprised to see a hike given the administration and consumption bifurcation.

In 2007, corporate credit was tight, Treasury yields rose, and that broke the credit and housing markets. Today we have tight credit spreads and a housing market that won't move with rising mortgage rates. Treasury Secretary Bessent wants lower mortgage costs but that's not happening. If rates stay higher for longer, it pressures corporate borrowing and consumer loans. Housing is a key driver. The question is how long the consumer can keep going.

Does 'interesting' mean recession?

The bifurcation between consumers is clear and getting more exacerbated. There will be consequences, both social and fiscal. More debt from transfer payments complicates the issue. The market will be volatile for the next month or so, especially before a potential big IPO and before we hear from Warsh. No one has a reason to take much more or less risk unless geopolitics change.

If we get better productivity and an AI boom that pushes up corporate profits, risk assets will hold. But I'm having flashbacks to summer 2007 when markets held for a while before breaking. We've had issues with private credit this year and concerns about AI-related layoffs. The Middle East situation is another factor. Historically, the US economy goes into recession.