Let’s begin with a passage from Dashiel Hammett’s novel The Dain Curse. A narrator attempts to persuade a woman that she is absolutely fine, while she believes she is under a curse: 

Nobody thinks clearly, no matter what they pretend. Thinking’s a dizzy business, a matter of catching as many of those foggy glimpses as you can and fitting them together the best you can. That’s why people hang on so tight to their beliefs and opinions; because, compared to the haphazard way in which they arrived at, even the goofiest opinion seems wonderfully clear, sane, and self-evident. And if you let it get away from you, then you’ve got to dive back into that foggy muddle to wangle yourself out another to take its place.

Even the most intelligent people can become lost in a fog. Those who appear certain of themselves are trying to suppress their inner doubts. When it comes to Fed policy and inflation’s grip on the economy, we’d all be better off if we just admitted how confused we are. 

Given Fed chair Jerome Powell’s comment that “we don’t need to worry about any more hikes” and the weaker payrolls number, we believe the bond bear market is over and we have seen the cyclical peak in bond yields. We wrote about this last week. The 10-year yields in France, Canada, Australia, South Korea, a