In a large Dutch oven, cook the diced bacon over medium heat until crispy. Remove bacon, leaving the fat. Pat beef cubes dry, season with salt and pepper, and sear in batches until deeply browned on all sides. Transfer to a plate with the bacon.

In the same pot, add the chopped onions and carrots, cooking until softened (about 5-7 minutes). Add the minced garlic and cook for 1 minute more. Stir in the tomato paste and cook for 1 minute.

Pour in the red wine, scraping the bottom of the pot to release any browned bits. Simmer until the wine has reduced by half. Return the beef and bacon to the pot. Add beef broth, bay leaves, and thyme. Bring to a simmer, then cover, reduce heat to low, and cook for 2.5-3 hours until the beef is tender.

While the stew simmers, melt butter in a separate skillet. Add the pearl onions and cook until golden. Remove. Add mushrooms to the skillet and cook until browned. Set aside.

Skim any fat from the stew's surface. Stir in the cooked mushrooms and pearl onions. Simmer for a final 15 minutes. Season with salt and pepper to taste before serving.