With inflation levels surging this year, you would expect to see long-term interest rates right along with CPI. As illustrated in the chart below, though, that has been far from the case. Ever since y/y CPI first crossed 2% back in Q1, the yield on the 10-year has actually declined even as CPI has surged to 6.8%! Fed purchases of treasuries have helped to keep rates low, but if the market was truly worried about inflation pressures becoming a longer-term issue, you would expect to see at least some upward pressure in rates.

While yields have seen little upside pressure from the surge in inflation, stock prices have piggy-backed the move higher the entire time. Investors continue to pile into stocks as low yields seemingly offer no other alternative and negative real yields in the treasury market make equities look more attractive on a relative basis.