Bonds vs. Stocks: Who's Right About Rate Cuts?

The bond market is sending a warning sign that rate cuts could come by early 2027, a year ahead of the Fed's outlook. The 10-year/3-month Treasury spread has narrowed to 0.79%, its tightest since early 2025, suggesting investors expect slower growth and potential recession.

Amazon shares rose 15% after AWS revenue climbed 37% year-over-year to $42.23 billion, but the rally remains concentrated among a few AI leaders, including Microsoft, Alphabet, Meta, and Nvidia.

The Fed is at odds with bond markets over the timing of rate cuts. Chair Kevin Warsh insists on holding rates until late 2027, while three officials want an immediate hike. Bond investors price in slower growth and expect rate cuts by early 2027.