Albert Edwards, Société Générale’s long-standing strategist and self-described “uber bear,” is sounding a warning that wealth advisors should not dismiss: the bond market’s slow-motion crisis could eventually break equities.
While stock investors remain captivated by momentum, AI optimism, and resilient earnings, Edwards argues that the fixed income backdrop is sending a different and far more troubling signal.
Long-term U.S. Treasury yields have been steadily climbing since the Federal Reserve slashed short-term rates to near zero during the pandemic. From their 2020 lows, yields on benchmark Treasuries are now up nearly four percentage points, the sharpest increase in more than four decades, according to Dow Jones Market Data. Such a persistent rise in yields not only challenges equity valuations but also has significant fiscal implications.
Higher yields make it costlier for the U.S. government to service its debt, and roughly 70% of Treasury obligations are in longer-dated securities. At the same time, federal borrowing needs are set to rise as fiscal deficits widen, further pressuring bond markets. Edwards warns that this combination of higher servicing costs and rising issuance could erode the government’s capacity to deliver fiscal stimulus—one of the major drivers of the post-pandemic recovery and the stock market’s resilience.
Despite this backdrop, equities continue to power higher. The S&P 500 has already posted 18 record closes this year, supported by investor enthusiasm for technology and artificial intelligence. Yet Edwards insists that markets are ignoring the risks at their own peril. “There is a slow-motion crisis unfolding in the government bond markets that equity investors continue to ignore,” he wrote in his latest research note. His message to advisors: equity markets cannot remain insulated from fixed income stress indefinitely.
The dynamic between cashflow yields and bond yields further illustrates the imbalance. According to Société Générale, free cashflow yields for the largest seven technology companies have fallen to just 2%, while capital expenditures have surged 60% year over year. This erosion in free cashflow yield—paired with bond yields that remain elevated—weakens the relative appeal of equities compared to Treasuries. In Edwards’ view, this divergence sets the stage for a potential crisis in confidence.
For advisors, the implications are clear. First, client portfolios heavily tilted toward equities may be more vulnerable than recent market performance suggests. Elevated valuations in megacap technology names leave little margin for error if investor sentiment shifts. Second, the bond market’s message is not merely academic—rising yields are a tangible headwind for both government finances and corporate valuations. Finally, while traditional bear-market catalysts like Fed tightening are absent, the unusual nature of today’s yield environment means that pressure could emerge suddenly and without the usual policy triggers.
Edwards’ warning does not imply an immediate market collapse, but it underscores the need for advisors to prepare clients for volatility. Building resilience through diversified allocations, evaluating equity exposure relative to cashflow yield, and maintaining flexibility in fixed income strategies are prudent steps in this environment. The narrative of boundless growth, particularly in AI-driven sectors, may continue to fuel markets, but advisors should keep one eye firmly on the bond market’s quiet yet mounting pressures.
