January’s strong equity market performance carried over into the first few weeks of February. Since then, we have seen a strong pullback in U.S. equities, despite some modestly good inflation news.

The U.S. equity market rally has continued through the first three weeks of October. International stocks and bonds have not fared as well. The yield on the 10-year Treasury has increased to 4.2%, driving prices down. The Fed’s rate cut reflected its confidence that inflation has been tamed, even though it’s not at its 2% target.

Thaler and others believed that human behavior influenced markets and the economy to a degree unexplained by theoretical optimization and equilibrium.