The bond market is pricing in the worst scenario: the administration is desperately looking for an off-ramp and there is none. If Iran doesn't give a palatable off-ramp, escalation is the only path forward.

We came out of the FOMC with cuts priced in, now hearing more hawkish tones from the Fed, particularly about fertilizers and pass-through to finished goods.

Because things seem to be in a free fall. You don't want to catch a falling knife. You get concerned inflation becomes broader. Just stand out of the way, let the market wash itself out.

Right now we're not expecting recession; you have to go well north of $120 oil for recession. In the meantime, let markets go where they're going.

It's a technical washing out of positions. Everyone got crowded into a few trades like gold, which was the ideal environment but an overcrowded trade. The only safe haven is Treasury bills.

It is working. Forward yields like the one-year, one-year forward have come down a bit. More hawkish rhetoric has anchored long-term inflation expectations more.

Hawkish expectations lead to higher rates, which dampen aggregate demand and cool things off.

The data over the next couple of weeks will give information. If labor data is softer, it tells you the labor market wasn't on firm footing heading into this.

Businesses are struggling with tariffs, AI impact, paused hiring, higher input costs, and demand destruction. Hiring is already starting to bite.