Is there really a disconnect between the equity markets and bond markets? The former are near all-time highs – clearly expecting a rosy future – even as the US yield curve has inverted, looking very much like it expects recession.

Peter Coy, at Business Week, has the story, quoting David Rosenberg of Merrill Lynch as saying that "it is highly doubtful that both asset classes can be getting the story right," and adding that diminished inflation expectations explain only one-third of the rally in the 10-year Treasury note since the Federal Reserve went on hold with its interest rate hikes this year.

If there is a disconnect, is there some way to arbitrage it? Go short S&P futures while hedging with Fed Funds futures? If asset markets seem confused, so does the Fed, which reportedly has been whispering to Richard Medley that "Fed officials remain more concerned about the threat of inflation than about slowing growth".

Alternatively, you could just believe Nouriel, who's as bearish as ever today, and, well, just go short everything, I guess. With the third quarter now behind us, there still seems to be a lot of disagreement on just how good or bad it was: Nouriel thinks we probably grew at a 1.5% pace but might have grown less than 1%; the consensus is 2.6%; and big sell-side shops seem to be hovering in the 2% range. We'll find out next month.

Is the Risk of a U.S. Recession Greater than Ever?