9 min read
The dominant trade of the week was not equities at new highs. It was the bond market quietly calling the equity rally's bluff.
Three senior Iranian officials told the New York Times on May 24 that Tehran had agreed to a memorandum of understanding to halt fighting and reopen the Strait of Hormuz. Trump called it "largely negotiated." Brent dropped roughly 6% on the week per Trading Economics, and the Dow punched through 50,000 for the first time. But on the same day Kevin Warsh was sworn in as Fed Chair, bond traders fully priced in a Fed hike by year-end — the first time that outcome has been fully discounted. The 30-year Treasury yield sits at 5.10%. Core PCE is 3.20%. WTI is still $96.91.
Equities are trading the peace dividend. Bonds are trading the inflation residue. Only one of them is right.
The disconnect this week is not subtle: equity vol prices a ceasefire, rate vol prices a hike, and credit spreads price neither. One of these three is wrong.
Gold at $4,510 is down 0.77% on the week and 4.87% on the month, sitting 19.85% below its 52-week peak of $5,627. RSI at 39.4 says exhausted, not panicked. The setup is curious: the World Gold Council reported Q1 2026 demand hit 1,231 tonnes with a record $193 billion value, central banks added 244 tonnes, and Chinese bar-and-coin demand jumped 42% to a quarterly record. Yet price is fading.
The explanation runs through real yields. With 10Y TIPS at 2.18% — top of its 12-month range — and the dollar at a six-week high, the opportunity cost of holding non-yielding metal is the highest it has been all year. Silver tells the same story: $75.83, gold-silver ratio at 58.59, still 37.73% below its 52-week peak.
If Warsh delivers a hike, both metals face another leg of real-yield pressure. If Hormuz reopens cleanly, the safe-haven bid disappears. The asymmetry has shifted.
S&P 500 at $7,474, up 0.89% on the week, 9.18% YTD from a $6,845 anchor. The Dow crossed 50,000 intraday on May 22 per BigGo Finance. RSI at 68.1 is hot but not yet stretched.
Here is what the index is digesting all at once: a fresh Fed chair pledging "price stability," April CPI at 3.8% YoY, divided FOMC minutes (8-to-4 vote split on whether the energy shock is transitory), and an Iran framework that depending on the source is either "largely negotiated" or "inconsistent with reality." The S&P is choosing to hear the dovish version.
Forward P/E sits at 21.81, with equity risk premium of 4.46 against a 10Y at 4.57%. That ERP is thin. The index is priced for the peace deal landing, oil rolling, and Warsh blinking. That is a three-leg bet, and rate markets are taking the other side of leg three.
Nasdaq-100 at $29,483, up 1.23% on the week, 16.77% YTD. RSI at 71.1 — formally overbought. Forward P/E 26.12. Price sits 17.32% above the 200-day EMA, the widest spread of any major US index.
The bull case got fresh fuel from Alphabet and Qualcomm earnings driving the index to record highs earlier in May. The bear case is structural: long-duration growth equities trading at 26x forward earnings while the 30Y yield prints 5.10% is a tension that resolves one of two ways. Either yields back off — which requires Warsh validating cuts the market already gave up on — or multiples compress.
VueFi's proprietary models track the rate-sensitivity of growth multiples across multiple regimes, and the current setup is unusually one-sided.
Russell 2000 at $2,869, up 2.71% on the week — the strongest among major US benchmarks. 15.60% YTD, 40.39% rebound from the 52-week trough. Forward P/E 27.37 on the institutional positive-earnings basis, with bottom-up DCF aggregate P/FV at 0.94.
Small caps are the cleanest expression of the "growth resilient, financing easier" trade — and they outperformed despite bond markets pricing hikes. That is the divergence worth flagging. Either small caps are right that domestic demand is strong enough to absorb tighter policy (NFIB optimism ticked higher, May payrolls still solid), or they are leaning into a Fed pivot that the front end of the curve is actively unpricing.
The Russell faces a real test at June reconstitution, June CPI, and the first Warsh FOMC.
MSCI EAFE proxy at $70.45, up 1.99% on the week, 12.78% YTD — outpacing the S&P. Forward P/E 15.28 still trades at a steep discount to US large caps.
But the macro is moving against EAFE. ECB Governing Council members Kocher, Demarco, Muller, and Stournaras all telegraphed June rate hikes per Bloomberg, with EU Commissioner Dombrovskis citing 3.1% forecast inflation versus a 2% target. A hiking ECB plus a Warsh-led Fed plus a six-week-high DXY is a three-way squeeze on euro and yen translation for dollar-based holders.
The valuation discount is real. So is the energy-import pain in Europe and Japan with WTI near $97.
EM proxy at $58.98, up 0.93% on the week, 9.72% YTD, 26.23% off the trough. Forward P/E 12.05 — the cheapest of any tracked equity bucket. RSI 52.9, no extension issue.
EM is the cleanest "Hormuz reopens" trade in the book. Lower oil helps importers (India, China, Korea), eases EM central bank inflation constraints, and reduces dollar pressure on EM FX. The risk runs the other way: if Warsh hikes, EM funding conditions tighten regardless of what Tehran does. China's May activity data and the June 7 OPEC+ JMMC are the next checkpoints.
TLT proxy at $84.68, up 1.22% on the week — but that bounce masks the structural damage. Down 2.85% YTD, down 8.15% from the 52-week peak, sitting below the 200-day EMA. The 30Y yield at 5.10% is at its 12-month high. Per Investor's Business Daily, options activity around the 20Y at the 5%+ level has surged.
The April FOMC minutes showed an 8-to-4 vote split on whether the energy shock is transitory. Waller — among the most dovish governors — said on May 22 that "you just can't look at this data and say, 'Oh yeah, we could cut rates here by September.'" That is the dovish wing capitulating. Treasury auction bid-to-cover at 2.55 is adequate but not strong.
If Warsh delivers a hike and the 30Y prints 5.25%+, every long-duration asset re-prices. That is the thesis breaker hiding in plain sight.
Bitcoin at $76,968, flat on the week, down 12.03% YTD. Trading below both 50- and 200-day EMAs. MVRV at 1.38, realized price $54,206, mining cost per BTC at $84,424 — price is below cost of production, a historically meaningful threshold. ETF net flows of -$1.26B (NET OUTFLOWS) over the past week per Farside, even as MicroStrategy added 34,164 BTC at an average of $74,395 per Bitcoin Magazine reporting.
Ethereum at $2,117 is the weaker hand: down 28.63% YTD, 57.28% off its 52w peak, ETH/BTC ratio at 0.03. Fear & Greed at 25 across the complex.
The crypto setup is split: sub-cost pricing and improving Japanese regulatory clarity (foreign stablecoins recognized June 1) on one side, and a hawkish Fed, rising real yields, and ETF outflows on the other. Liquidity-sensitive assets do not love a 2.18% real 10Y, and this week the ETF flow data confirms it.
REIT proxy at $96.78, up 3.06% on the week — the best print across asset classes. 9.37% YTD, basically at its 52-week high. P/FFO at 19.40, dividend yield spread at -0.97%.
But the 30-year mortgage rate climbed to a near-nine-month high per Money Street News, and that is the contradiction. REITs are trading like rate cuts are coming. Mortgages are trading like they are not. One of those positions is being squeezed within 90 days.
VueFi's proprietary models weigh the rate-sensitivity of REIT cash flows differently across yield regimes.
Equity vol vs. rate vol. VIX at 16.81 sits near 30-day lows; MOVE at 79.72 sits near 30-day highs. Stocks are pricing the ceasefire, bonds are pricing the inflation tail. Historically, MOVE leads. When rate vol stays elevated while equity vol compresses, the resolution is usually equity vol catching up — not bond vol calming down.
REITs vs. mortgage rates. REITs ripped 3.06% on the week while 30Y mortgage rates hit a nine-month high. Real estate equity is pricing easing; real estate financing is pricing tightening. One of them is mispriced, and the resolution comes through the first Warsh FOMC.
The Signal tells you what happened. The Consensus tells you what to do about it. This week's Consensus walks through the equity-bond divergence across all 11 tracked assets, with the proprietary rotation framework weighing how each asset re-prices under a Warsh hike, a Hormuz reopening, and the scenario where neither resolves cleanly.
Model Consensus
Highest Conviction
Model Consensus
The Consensus
International Emerging scored 7.0 — 4 of 4 models agree on Buy.
Per-asset narratives, fair value estimates, model disagreement analysis, and rotation recommendations for all 11 assets.
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