Part of writing about macro and markets in the post-Lehman world is coping with the compulsion to apologize for good news.

It’s a hilarious paradox. Typically, expressions of regret accompany bad news: “I’m sorry Mr. Johnson, but that’s not a subconjunctival hemorrhage. That’s Ebola.”

But it’s different with macro commentary, which was democratized and commoditized after the financial crisis. Initially, it was a cottage industry. Now it’s a pretty crowded space, and because “fear sells,” everybody’s a bear. If you’re a bull, you’re doing it wrong.

Relatedly, being bearish (perpetually) has become synonymous with being well-informed. Being constructive, on the other hand, is tantamount to being a clueless Pollyanna. I talked about this at some length five years ago, during the worst December for US equities since the Great Depression. “If you spread fear, it looks like you have a deep knowledge of things,” I wrote (I got the idea from a friend). “If you’re calm, it’s like being ignorant.”

No one wants to be perceived as ignorant, so when things are going well, as they are now, there’s a tendency to apologize, just not in so many words. Recaps of historic cross-asset rallies have to end with some version of the rhetorical “What could go wrong?” quip. Every mention of “Goldilocks” and “immaculate disinflation” has to include derisive language to account for the allegedly inevitable humiliation anyone peddling naive narratives will suffer when it all falls apart. And so on.

With that in mind, I’m very sorry about last month’s rollicking rally, and also for US macro data which continues to suggest that, against the odds, inflation may return to target in America without a deep recession and possibly without a recession at all. The balance of this week’s labor market data could tell a different story, but as one Bloomberg terminal blogger pointed out following the favorable JOLTS report, the softer read on job openings makes it “more difficult for the rest of the data to confirm a coherent picture of a hotter-than-expected labor market.”

I assume this is clear, but just in case: The risk to the Santa rally isn’t some cataclysm (notwithstanding the elevated odds of a severe geopolitical escalation), or even an adverse turn in the data, but rather simple exhaustion of the flows that fueled last month’s historic surge and the possibility that rate-cut pricing for 2024 is overdone (and you’ll note that “overdone” is something different from “misguided”).

On the former point, I highlighted some color from Goldman’s Scott Rubner, who contended that after a buying spree in November, the risk around CTAs is now asymmetric to the downside, where that means they’d be bigger sellers in a downdraft than buyers in a big up tape. That’s not all Rubner said. “In terms of incoming questions, it is all bullish, the opposite of the incoming questions at the end of October,” he wrote. “Everyone is in the pool.” He used the AAII survey to illustrate.

Pointing to the collapse of bearish sentiment to make a point about risks to forward returns, Rubner noted that “this much ‘dovish’ euphoria typically underperforms the unconditional performance.”

That “dovish euphoria” had markets betting on five 25bps rate cuts in 2024, an outcome the Fed won’t validate under any circumstances. While cuts next year are all but a foregone conclusion, no one knows how deep (or, more to the point, how shallow) those cuts will ultimately be.

As Morgan Stanley’s Mike Wilson emphasized, the ebb and flow of long-end Treasury yields and US equity multiples in 2023 followed the waxing and waning of 2024 rate cut pricing fairly closely. That suggests the recent re-rating is vulnerable on any hawkish reversal.

“One can attribute a good portion of the movement in 10-year Treasury yields over the last six months to changes in the bond market’s view on what the Fed will do over the next year,” Wilson wrote. “Perceived pivot[s] hurt bonds and stocks between July and October and helped considerably since then.” He called the 130bps of cuts priced through year-end 2024, “a high bar.”

So, if it’s a bear case you’re after, it’s not especially difficult to conjure one simply on the notion that in an “everything rally,” “everything” tends to overshoot, and that’s where we are now — with rate cut pricing overdone, systematic dry powder exhausted and sentiment uncomfortably stretched.

Recall from my weekly flows and sentiment update that since the onset of the everything rally early last month, US equity funds took in almost $58 billion on net.

Over the same stretch, individual investor sentiment sprinted higher to register one of the most bullish readings of the year.

Rubner mentioned that too. “Passive global equities have seen >$48 billion worth of inflows over the past four weeks,” he said, describing “a bit of FOMO” as exemplified by “the blow-off Bitcoin move.”

At the end of the day, though, it may be hard to get a meaningful selloff in equities as long as bond yields continue to fall — up to and until the point when the data turns unequivocally recessionary, as opposed to merely indicative of disinflationary “cooling.” The JOLTS report triggered yet another big rates rally. Long-end US yields were some 14bps lower on Tuesday. At 4.17%, 10-year yields were down ~85bps from the intraday cycle highs in October.

As much as I’d like to indulge readers’ affinity for tabloid-style, bearish bombast, the data (and bond yields) just aren’t cooperating. Maybe I’ll have bad news for you by the end of the week. Until then, I’m sorry.