They say the markets are forward-looking, discounting what will happen in the near future rather than what has already happened in the recent past. I believe this is true. However, some markets are better at this than others.
And right now, two major markets appear to be discounting totally different outcomes. The stock market has rallied hard off of its recent lows, suggesting fears of recession and a concomitant bear market were overblown.
At the same time, long-term interest rates, after falling along with stocks earlier in the year, have failed to match the recent equity rally. In fact, they've reversed right back to their lows. This suggests the bond market is as worried about low growth and inflation as ever.
So, who's right?
Personally, I'm leaning toward believing the bond market. The stock market might not care about the current earnings recession, but history shows it leads to an economic one 81% of the time: