I've said it repeatedly in recent years, that when the overall bond market enters a secular bear market that Wall Street won't know how to trade it because no one that currently works on Wall Street was even alive the last time there was a bear market in bonds.
Boy have I been proven correct.

Now here's the thing: if everyone is trading a certain way, then to bet the opposite way will surely bankrupt you.
On the other hand, the fundamentals are like gravity. You can fight gravity for a long time, but gravity will always win in the end.
Right now Wall Street is betting against gravity, and that gravity is coming in the form of inflation.

The cost of living jumped 1% in May on the back of higher rents, gas and food prices, pushing the rate of U.S. inflation to a 40-year high of 8.6% and making it harder for Americans to afford everyday staples.

The increase in the consumer price index in May was more than triple the gain in the prior month. Economists polled by The Wall Street Journal had forecast a 0.7% advance.

The increase in inflation over the past year moved up to 8.6% from 8.3%, a new cycle high. The last time inflation rose as rapidly was in 1981.

Wall Street was surprised by the 40-year high inflation rate, even though everyone reading this wasn't. For 40 years inflation was falling, so Wall Street keeps expecting that trend to return. The idea that inflation is here to stay is not something they have even considered yet.

What you see instead are bond yields that are waaayyy behind the curve. Who in his right mind would buy a bond that yields 3% in a time when price inflation is running at 8.6%?

To make matters worse, Wall Street expects the Fed to stop raising rates at 5%, because they also see the economy going into recession. In fact, they see the entire global economy going into recession.

Investors, bankers, and entrepreneurs have been discussing the chances of a coming recession for months. Now the world’s premier international credit institution is joining the chorus that a recession is likely, and warns that something even worse might be on the horizon.

Global economic growth is expected to slow down before the end of the year, and most countries should begin preparing for a recession, according to the World Bank’s latest global economic forecast released on Tuesday.

“For many countries, recession will be hard to avoid,” wrote World Bank president David Malpass.

These two contradictory forces are causing a bipolar reaction.

Even when every indication points to stagflation, stock market investors continue to buy every dip, and the US dollar reaches new heights.
At some point gravity will win. When that happens the correction will likely be violent.