Is the market becoming irrational?

Markets are rebounding strongly after the indiscriminate drop of last year.

We saw an early sell off of risk aversion trades (Government Bonds), with investors moving slowly into more risky assets, such as investment grade/high-yield corporate and emerging market bonds, which have all delivered double digit returns this year. Although it is widely argued this rebound is irrational, it is less irrational than many people believe. The same can be said for economic growth. We have moved from a situation where deterioration was simply slowing, to a clear improvement in sentiment and data. An economic rebound at this stage of the cycle is unsurprising, because ...