In recent weeks, financial markets have been sending conflicting signals about the risk of inflation, recession, and the sustainability of debt. Japanese and British yields, especially, spiked but then abated in line with falling US rates. 

To pick through this head-scratcher, Dan Schwartz, head of macro at Energy Aspects, talked to Medley Advisors’ Andrew Besuyen and Pepijn Bergsen. 

"What I think is happening is: the market thinks the [Federal Reserve] is going to be appropriately dovish, cut rates, support economic growth in the US and stop us from falling into a recession,” says Schwartz. “So the lower yields you're getting here are supportive of activity in other financial markets and one of the reasons why markets trade so well … The shift in the Fed's path of least regret has moved from guarding against the flank of potentially higher inflation from passthrough from tariffs and potentially higher inflation expectations into making sure that we don't see further deterioration in labour markets”.