Investors' Recession Bet Sparks Bond and Stock Market Crash Concerns

The bond market is predicting a recession and expecting the Federal Reserve to cut interest rates to stimulate activity, but actual economic data suggests continued growth for the US. If the bond market's expectations diverge from economic reality, it could lead to a painful market adjustment and investor losses. The consensus assumes a sudden stop in the economy, so even if conditions are just okay for the economy, the divergence with the baseline could cause a serious market mess. The Fed may be forced to restart rate hikes later in the year to cool off any fears of inflation kicking back up, which would slam the bond market and send yields soaring.