In recent weeks, the market narrative has gradually shifted from fears of further monetary tightening to fight inflation to fears of a U.S. recession. Thus, since last October, every time government yields rose, the S&P 500 fell. However, there is a decorrelation between the index (in white) and bonds (in blue), which, it should be remembered, move in the opposite direction to yields.

(Source: Bloomberg)

One of the main markers of a recession is consumption. Retail sales were up 0.4% in April. Most notably, Home Depot rose nearly 5% after lowering its full-year 2023 earnings forecast.

The second marker is employment. As we saw in the monthly report earlier this month, the U.S. job market is particularly resilient. Weekly jobless claims also came in 22k lower at 242k versus 251k expected.

Investors therefore seem to be less concerned about stability - or even a rise in bond yields - than about the prospect of a recession that has not (yet) crystallized in reality. In the long run, an easing of monetary policy against a backdrop of controlled inflation, as expected by the markets this summer, could even boost growth and, by extension, the stock market.