I agree, the divergence here would seem to be material. I think the bulls believe that finance isn't a major contributor to the HBs fortunes while most bears see a bubble driven by low rates and loose credit. I would expect to see the HBs trade down but that said we seem to be in some pretty wild territory here so I'm just not sure where we'll be at next week. Since CNBC is telling us daily about the HBs there are a lot of momentum players involved now that are pushing the sector.
A big surprise to the upside on the jobs number on Friday would amp talk of a 50bps raise by the Fed and would seem to cause the HBs to sell off. A miss to the downside will cause bonds to rally and probably the HBs too. Since the jobs number is so volatile Friday will be interesting.
That sums it up pretty well. From the bulls' perspective, it's not so much that they believe that finance is not a major contributor to the HB fortunes but that it's not the only one. The bulls believe that the economy can absorb a 1% plus hike and that inspite of such a hike, rates would still be damn cheap. They also believe it will take expanded economic activity to create enough inflation to cause more tightening, and the negative of rising rates would be offset by higher incomes from a stronger economy.
At this point I wouldn't say that a crash is not possible, but if you look at past history it's going to take a recession to do it and right now there is not enough evidence to indicate that it's imminent. In the short term there is no doubt the mo-mo players are jacking with the sector big time.