Markets are often driven by narrative, themes, and memes and right now the mist discussed theme is stagflation. Slower growth expectations are causing a revision of earnings. Slower growth thinking over inflation fears is driving the Treasury rally. Higher inflation is causing a repricing of equities and has caused the horrible year to date performance in bonds.
Following the top narrative may not be the best forward-looking approach, but it is a variation on following the trend or being a part of the herd. Acting on the herd mentality will usually get you ahead of the pack that may be talking about themes but not forming decisions. As long as the current stagflation theme is in place, equity and bond trends will continue.
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