Since the significant rate cut by the Federal Reserve in September, the biggest market change has been the rise in US bond yields instead of a decline.
The Fed's rate cut has led to a tighter financial environment (US Treasury bond yields up by 60bps, real interest rates up by 40bps).
The market now believes: i) the Fed has triggered the next wave of inflation; ii) the Fed has made a major policy mistake.
While there is no major panic in the US stock market (good performance in the third-quarter earnings season), it has once again stifled "breadth" (the Mag 7 of the S&P 500 index, which accounts for 50% of the 22% increase so far this year).
