Assets that grind higher over decades rarely reverse course suddenly. Instead, the prolonged, slow uptrend builds investor complacency, leading to an overbought state and a final parabolic surge. This blow-off top is the necessary precondition for a significant, sustained decline, a pattern Gurevich notes he missed in the bond market.

When bond prices exhibit short-term mean reversion (up one day, down the next), it's a quantitative sign of deep uncertainty. This reflects the market and the Fed struggling to choose between fighting inflation and addressing weakening employment, leading to no clear trend until one indicator decisively breaks out.

Contrary to the perception of market turmoil, the recent global bond sell-off has been characterized by low volatility. This orderliness suggests the move is driven by a durable, fundamental repricing of interest rates rather than a temporary, fear-driven market dislocation that would typically involve high volatility.

Bonds are caught between inflationary pressures (negative) and growth risks (positive). This tension is viewed as unsustainable and likely to resolve with yields falling, as either inflation abates or a prolonged disruption forces a focus on severe growth risks.

The bond market will become volatile not when rates hit a certain number, but when the market perceives the Fed's cutting cycle has ended and the next move could be a hike. This "legitimate pause" will cause a rapid, painful steepening of the yield curve.

Despite high inflation, the bond market's 'break-even rate' predicts inflation will plummet below the Fed’s target within a year. Since the Fed is holding rates steady, traders are implicitly betting that a severe economic slowdown and demand destruction are the true forces that will kill inflation.

The relentless rise in bond yields is partly driven by a 'buyers' strike.' Major capital allocators like pension funds, endowments, and retirees see the upward trend and are holding back, waiting for even more attractive entry points before committing capital, thus exacerbating the move.

While equities had a mixed reaction to inflation data, the bond market shows clearer concern. FedWatch data reveals a significant shift in expectations over the past month, with the probability of a 25 basis point rate hike by year-end rising to 30%, while the probability of a cut has diminished.

The 2026 market outlook is not linear. It involves a turbulent first few months due to crowded positioning, followed by a 'last gasp higher' rally as monetary and fiscal policy turn into tailwinds. This medium-term strength will likely precede a long-term secular bear market driven by the AI CapEx bubble burst.