“Blah, blah, blah.”

That’s how BofA’s Michael Hartnett described the bear case for equities with the S&P having achieved a 20% rebound from the lows in October. Ostensibly, it’s a bull market.

As I reminded readers in May of last year, when the S&P breached the 20% threshold on the downside amid the first Fed hikes of the cycle, “bulls” and “bears” and the thresholds that define them are another manifestation of our species organizing around an interconnected system of shared myths which imbue our daily lives with meaning.

We’ve decided, collectively, on an arbitrary threshold beyond which gains or losses in the value of our claims on corporate profits (real or extrapolated, GAAP or non-GAAP) can be described in terms of animals. Bulls and bears. An unconscious reversion to our natural penchant for animism.

This week, we danced, cheered and chanted as the line on the screen meandered higher. (“Bull, bull, bull.”) For all the progress, we sure do act like a primitive bunch sometimes.

Hartnett (still) isn’t buying it. “We remain bearish [and] still think the biggest ‘pain trade’ in the next 12 months is Fed funds 6% not 3% [and] that <3% inflation requires >4% unemployment,” he wrote. “[The] math of $220 EPS + 20x PE + 150bps rate cuts won’t add up.” Then came the “blah, blah, blah.” Another week, another recitation of the nominally plausible bear case and another shrug from market participants who Hartnett will readily acknowledge are “bored of bears.”

And yet, the paradox is that many are still bears themselves. Some discretionary investors remain under-positioned, and recession expectations are now pervasive. Albert Edwards called the allegedly imminent downturn “the most widely predicted recession in US history” this week.

Paradox within the paradox: Soft landing hope floats. In fact, Hartnett said consensus is “probably now around 70% soft landing, 25% hard landing, 5% no landing.” The issue, as I was keen to point out here on Wednesday, is that there’s a fine landing between these different sorts of “landings.” The better the economy is, the more emboldened the Fed will be. That needn’t mean a materially higher terminal rate, but at the least it means higher for longer. That, in turn, raises the odds of a hard landing, unless you harbor an extremely sanguine view about the US economy’s capacity to tolerate 5-handle Fed funds for a prolonged period of time.

Note from the updated visual on the right above that the Fed needs monthly CPI prints of 0.1% if headline inflation is going to run below 3%. I haven’t done that math, nor have I done the math to determine how likely such an outcome is, but what I would say is that given the sheer amount of macro uncertainty and the confluence of inflationary macro, geopolitical and sociological trends mentioned here on Thursday afternoon, the idea of consistently flat-ish monthly CPI prints in perpetuity seems like wishful thinking. Unless there’s a recession, in which case we’re begging the question.

The figure on the left above just underscores the notion that despite more than a year of aggressive tightening across locales, unemployment rates and real policy rates are very low (or still deeply negative in the latter case).

“Q1 recession fears melt[ed] into Q2 Goldilocks greed,” Hartnett wrote, noting that IG credit is annualizing 7.5% while the S&P is “breaking out bull market bubbly.” He went on to reiterate the “rising rates/liquidity drain” bear risk for Q3, before warning on the extension of hiking cycles. “Central banks are pivoting… back to hikes,” he wrote. “The Fed ain’t done.”