Shell-shocked investors are piling into US Treasuries on concern that Donald Trump’s trade war will trigger a worldwide recession — ignoring for now, at least, the risk that the same punitive tariffs may unleash another bout of inflation.

After a rally in US government debt that sent the two-year yield to touch the lowest since 2022, traders are positioning for more gains and pricing in a greater chance the Federal Reserve moves most aggressively to cut interest rates to keep the economy from stalling. While the bullishness may be warranted in the short term, AlphaSimplex Group’s Kathryn Kaminski says that investors fixated on slowing growth are ignoring Fed Chair Jerome Powell’s comments about the inflationary impact of tariffs at their own peril.