The Stock Market Does Not Care
Dan Russo, CMT®
June 22, 2026
The way I learned it, compared to the equity market, the bond market was the “smart money.” We were always told to watch what bonds were doing. As big proponents of intermarket analysis, we still do exactly that and from multiple angles.
Right now, the message from the bond market is clear. Investors are pricing in two rate hikes. On the surface, that should be a negative for equities. But the so‑called “dumb money” does not seem to care.
The Two‑Year Yield and Effective Fed Funds Rate
We’ll depart from our usual starting point this week.
Last week was the first time we heard from the new Federal Reserve Chairman. While rates were left unchanged, the tone clearly shifted toward a tightening bias. Looking at the two‑year yield, currently around 4.20 percent, versus the Effective Fed Funds Rate, the bond market is effectively pricing in two hikes.
Source: Optuma
S&P 500 and NASDAQ 100
You would think a more hawkish Fed would weigh on equities. Instead, the major indices moved higher last week.
The gains were not as forceful as what we saw in April, May, and early June, but higher is higher. Both indices sit just a stone’s throw from all‑time highs and remain above steadily rising 60‑week moving averages.
Source: Optuma
Commodities
The Fed also made it clear that inflation remains above its 2 percent target and that it remains committed to price stability.
Commodities may be the key here. Is the equity market ignoring the bond market because commodities are signaling that inflation has peaked? That’s a question, not a conclusion.
What we do know is that the iShares S&P GSCI Commodity‑Indexed Trust could pull back to its rising 40‑week moving average and still be in a long‑term uptrend. With CPI running above 4 percent, it would be premature to declare victory on inflation.
Source: Optuma
Final Thoughts
Many times throughout our careers, we have heard statements along the lines of “the bond market is the smart money.” These ideas tend to get passed down from trader to trader, desk to desk. No one really knows where they originated.
Some people treat them as fact. We do not.
You can drive yourself crazy trying to figure out when these old pieces of market lore will play out. Or you can focus on what actually matters, the data in front of you.
Right now, stocks are in a bullish trend, and they simply do not care what bonds are signaling.
