We tend to side more with the bond market but suspect that the truth lies somewhere between. With bond yields at these levels we are really pricing a high certainty of ultra low growth, inflation and no real prospects of Fed rate rises for two-three years. While we have sympathy with such a view we wouldn't be as confident in the certainty of such an outcome. Some additional risk should perhaps now be priced in at these extreme levels. The equity market is probably pricing in more of a normal recovery even if it’s not pricing in a strong one. The reality is that the two markets continue to tell us wildly different things. Such an extreme disparity between the two asset classes is fairly unique outside of 1990s Japan so anyone that has a high level of conviction as to how this pans out is likely ignoring the high degree of uncertainty prevalent in markets today.
On top of that look for an excellent technical inter-markets take on link between Japan and US via Trader's Narrative by Matthew Claassen - Claassen: Warning From Intermarket Correlations.