An optimist’s guide to the bond market

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.

Katie Martin Published October 1 2026 The US personal consumption expenditures inflation index — the Fed’s preferred measure — came in softer than expected in August, at a 3 per cent annualised rate, excluding food and energy. More important, perhaps, the prior two months’ readings were revised down, leaving the three-month rolling average at 2 per cent, the central bank’s target. The 10-year Treasury yield rose four basis points, to 5.29 per cent, yesterday.

Part of the decline in PCE was due to a change in how the index handles financial services prices. The longer-term trend still looks more sideways than down. Most important, though, the growth story is rocking and rolling: second-quarter real GDP was revised up from 1.5 per cent to 2.2 per cent yesterday.

US benchmark 10-year yields gained half a percentage point in September, with some rather gut-wrenching days in the mix that have hammered some hedge funds. You have to go back to 2022, a proper bond bloodbath, to see that kind of action. However, it is still possible to turn that frown upside down.

The first reason to be cheerful is that, thankfully, this is not 2022, when bonds and stocks both tumbled together. As Jurrien Timmer, director of global macro at Fidelity Investments, pointed out in a Linked In post the other day, the secret ingredient is earnings. If the 10-year yield rises to 6%, that suggests an equity P/E ratio of 16x.

The S&P 500 is currently 19-20x. A 4-point drop in the P/E ratio is a 20% valuation haircut, but if it’s offset by 30% earnings growth, we could be spared the kind of drawdown we experienced in 2022. Second, this is what bonds are supposed to do in a growth-y environment.

Third, this is not a solvency crisis or anything like that. It is the effluent coming off a massive repricing on the path ahead for the Federal Reserve. Chair Kevin Warsh put those doubts to bed in Jackson Hole and forced the market to flip expectations.

Bear in mind at one point last year, the market was pricing in five interest rate cuts from the Fed in 2026. Now it is pricing two rises — one done, one to go.