Jul 10, 2025 - Business

Stocks and bonds split on the economy

Madison Mills

A line chart comparing the performance of the bond market, specifically overnight index swaps with a 1-year maturity, to cyclical stocks, which are outperforming the previously mentioned bonds. — Screenshot: Apollo Academy

Bond investors think growth is slowing, so they're pricing in imminent interest rate cuts from the Federal Reserve.

But stock market leadership in cyclicals is indicating the opposite, that growth is accelerating, according to a chart from Torsten Slok, chief economist at Apollo.

Why it matters: As stocks and bonds disagree on economic outcomes, only one market can be right, and the winner could have implications for market leadership ahead.

What they're saying: "Either the bond market is wrong, and rates must move higher due to accelerating growth. Or, equity markets are wrong, and stocks have to move lower because growth is slowing down," Slok says in a note.

Be smart: The bond market is often considered the smart money in the room, and equity investors are usually happy to ride the bull market waves without monitoring reality.

But this dynamic has been shifting, as the economy has been resilient against everything from the pandemic to rate hikes to tariffs.
The lack of friction has not provided a lot of pushback for equity investors, nor has it validated the skeptical bond investors.

Zoom in: Bank of America may agree with the stock market. It sees stagflation ahead, with slowing growth and continued inflation.

Goldman Sachs may agree with the bond market, as the bank expects three rate cuts this year.

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Stocks and bonds split on the economy

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