Have “oblivious” US equities finally woken up to what’s going on in the rates complex and/or to the threat of a Fed wedded to a “higher for longer” policy bent?

Maybe. Maybe not. It’s too early to say.

Breathless editorializing around losses for stocks early this week made for good headlines, but one down session doesn’t do much (anything, really) to mitigate the myriad discrepancies skeptics see between rates and equities, and between earnings forecasts and the stormy outlook for margins.

Although the June FOMC meeting isn’t fully priced yet, terminal rate expectations flirted with 5.4% Tuesday.

Markets are still anticipating at least one cut by the end of the year, and while it’s probably fair to suggest the recent repricing has mostly run its course, one more escalation could succeed in wiping away speculation on easing in 2023 for all intents and purposes.

On Wednesday, a smiley Jim Bullard showed up on CNBC to reiterate his preference for faster hikes. “It’s become popular to say, ‘Let’s slow down and feel our way to where we need to be,’ [but] we still haven’t gotten to the point where the Committee put the terminal rate,” he said.

Bullard’s advice: “Get to [terminal] and then feel your way around and see what you need to do. You’ll know when you’re there when the next move could be up or down.”

It wasn’t immediately clear what that meant, but one interpretation was that a finger-in-the-air way to gauge whether you’re sufficiently restrictive is to hike rates far enough that the risk of needing to cut them at the next meeting is real. If that’s what Bullard was saying, I’m not sure it’s ideal. It’d underscore traders’ view that wherever terminal is, cuts are coming quickly after the peak is reached.

Bullard, along with Loretta Mester, was partly responsible for last week’s escalation in terminal rate pricing. Neither vote this year, but both hold considerable sway, and both expressed some openness to a return to a half-point hike cadence. That remains unlikely, but their comments were enough to rattle rates.

On Wednesday, Bullard didn’t attempt to inject any additional hawkishness into the equation, which some will invariably suggest means 5.50% remains the “upper limit” — for now. He also said the Fed has “a good shot” at winning the battle this year, and without too many economic casualties.

Much attention was given early this month to the easing in financial conditions brought about by January’s “everything rally,” as stocks rose and bond yields fell.

That’s counterproductive for the Fed, and it’s now going into reverse thanks to higher rates and nascent signs that the equity rally is exhausted.

“With the Fed’s more hawkish tone of late and subsequent rise in rates, financial conditions have started to tighten again and should weigh on stock prices,” Morgan Stanley’s Mike Wilson remarked.

Commenting further to CNBC Wednesday, Bullard said the Fed’s risk is that “inflation doesn’t come down and reaccelerates.” “Then what do you do?” he wondered. “We’re going to have to react [because] if inflation doesn’t start to come down, you risk [a] replay of the 1970s and you don’t want to get into that.”