The market definitely has some problems, but they're mostly good ones. One problem is that the economy just continues to hold on longer and stronger than economists and investors have allowed for in their models. Another problem is that people are really, really, possibly-too-optimistic about what the incoming Trump Administration can do to make things even better. And if you really want to sound bearish, you could argue that the A.I. hype cycle is at a freshly unreasonable peak. 

Honestly, these are good problems to have. A bad problem would be, say, if inflation was actually building momentum again and that the Fed may need to hike rates. That's not what the bond market is suggesting -- not yet, at least. Yields and the dollar are in a rapid ascent since Jerome Powell began cutting interest rates in September, an unusual but perfectly logical cause-and-effect in retrospect: when you provide support to an economy that's on firm footing, you're likely to stimulate it. 

So here we are, with GDP at 3%, asset prices at all-time highs, and 8 million open jobs, according to Tuesday's JOLTS data. The services economy is also rocking, with people travelling and living in-style. Catch, is, yesterday's data also showed a shocker in the prices we're paying for these services. 

So far, the bond market is paying more attention to the good side than the bad side. The Treasury curve is still mostly bear-steepening, with the exception of a slight flattening in the 10s-2s after an intraday battle on Tuesday. Bonds sold off hard around the hot JOLTS and ISM data, with the 10-year inching near its 52-week high of 4.74%, but as stocks sold off, bonds found some support. That's still notably different than in 2022, when nothing could stop bond bears facing higher interest rates, which flattened and inverted the curve, which is also unlike today.

If the curve starts to invert, things probably will get uglier. That's what bears want to see. For now, tech and Trump speculation got way overheated and is cooling off. If bonds continue selling off while stocks sell off, and the curve starts inverting again, that could mean rate hikes, a soaring dollar, and a total mess of an equity market. For now, let's see if 5,850 breaks on the S&P – if bears can't do it, bulls are very much alive.

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