Alessio Rastani and Charlie Burton discuss contrarian positions on bond yields, oil, and crowd psychology in markets
Alessio Rastani and trader Charlie Burton share their contrarian market analysis, focusing on bond yields, oil prices, and the dangers of following crowd sentiment.
Summary
With bond yields dominating market headlines and inflation fears running high, the two analysts argue this consensus focus is itself a contrarian signal — and that yields may already be in a topping process over the coming months. They argue that elevated sentiment around a particular theme — such as inflation fears or rising oil prices — is itself a signal to start looking the other way. Oil's recent sharp reversal from $106 back below $100 is cited as a near-term example of crowd-driven euphoria unwinding. Technical divergences are forming on bond market charts, suggesting a potential bottoming process possibly extending into early 2027. Burton also references Gustave Le Bon's 1890s book The Crowd as essential reading on herd behaviour in markets.
Key Takeaways
FULL TRANSCRIPT
Contrarian view on bond yields and the topping process
Alessio Rastani: I'm a contrarian, and so I'm seeing bond yields actually in an overall topping process over the next couple of months. Not necessarily today, but over the next couple of months. I'm looking at the bigger picture — monthly and quarterly charts — and also the sentiment. I think when everyone's talking about bond yields, inflation, and interest rates, I have to start looking the other way.
I think that's going to take a while, because inflation is going to remain elevated for a while. But the optimist in me is that the Middle East conflict will settle to some degree, oil prices will start to drift lower over the months ahead, and then the inflationary pressures will start to come down as well over the months going into next year. So all of the concerns about bond yields and inflation right now — four months down the line it will be very different. Those concerns will start to diminish.
I think that's an interesting chart at the moment, but it is a threat to the stock market as well, because if yields do carry on pushing higher, that is something that could act as a drag on the stock market too.
Charlie Burton's view on bond market divergences
Charlie Burton: Absolutely. I would totally agree with you on the contrarian view, especially with regards to the bond market. I've noticed when I look at the chart of the 20-year Treasuries — the actual bond market, like TLT — I'm seeing divergences on the chart. I do believe that the bond market is in the process of a bottoming formation. I'm not saying the bond market has bottomed just yet, but I think that in the next several months we may potentially see some kind of a bottom in the bond market again — potentially. Maybe not this year, but maybe going into the beginning of 2027.
I do see your point and I agree with you. Usually when everyone is talking about one thing — when everyone is super focused on bond yields and inflation — we should start looking the other way.
Gustave Le Bon's The Crowd and herd behaviour
And that brings me to another point. There's another book I'm reading called The Crowd by Gustave Le Bon. I would suggest — by the way, guys, if you get a chance, get this book and read it. It was written in the 1890s — a study of crowds, a study of herd behaviour. I've been told it's a great book, and this is why it's important to be very wary and extremely careful with crowds.
Alessio Rastani: On a micro basis — we're talking big picture here — I'm seeing bigger picture divergences, but that's going to take time.
Charlie Burton: Exactly. But on a micro level, we saw exactly this just two weeks ago in the oil market. Oil went back up to around $106, and it was everywhere on the news — oil's up, inflation, blah blah blah, oil's going to carry on back up to new highs. And when the crowd, even on a micro basis, gets like that — and yet technically we still have reasons to believe that a given market might reverse — what happened just a week or so later? Oil's back down below $100. It's back down at $92 now on WTI, and even Brent crude is down at around $97 as we speak.
I think we see this all the time. When you see pockets of euphoria like that in oil, look for reasons why — if everyone's in, it's likely there's going to be profit taking going on, or short sellers coming in, especially into technical levels. It's the same with the bond market as you're saying. Whether you're looking at the 20-year, the 10-year, or the 30-year, there are divergences picking up, a huge amount of sentiment negativity toward bonds, and hawkishness toward higher yields — then you've got to be at least cautious and look for reasons why, at some point, these markets might be close to some form of turn. Not today, not tomorrow, but over the next few months.
Alessio Rastani: Absolutely.