One of the points we made continuously in Q4 (and we were especially keen on emphasizing it in December) was that investors had fallen victim to a (largely false) narrative about the Fed and the economy.
Subsequently, market participants lost track of their own role in shaping that narrative, setting the stage for a self-fulfilling prophecy to take hold.
Numerous analysts weighed in on this phenomenon. For instance:
Around the the time the 2s5s and 3s5s inverted, Nomura's Charlie McElligott warned we were "reverse engineering a growth slowdown".
Marko Kolanovic famously decried the role played by social media and negative news amplification channels (e.g., blogs and other portals) in the feedback loop between systematic flows, volatility and liquidity. "If we add to this an increased number of algorithms that trade based on posts and headlines, the impact on price action and investor psychology can be significant", he cautioned.
Deutsche Bank's Aleksandar Kocic talked of a "financial parallax", "cognitive instability" and "recession as subverted perspective"
Fast forward to February and a new narrative has taken root. Or at least it seems that way. Now, the reinst
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