Why a famed strategist says the government bond market could spoil a fragile bull rally

• Albert Edwards warns a technology stock balloon between high values.

• The technology sector is currently 37% of the US stock exchange and exceeds the DOT-COM period summit.

• However, Edwards said the rally will be stopped at the end of the increasing bond returns.

Société Générale strategist, such as high market valuation levels Albert Edwards‘Low missions tend to serve well, such as recent market timing tools.

He accepts it so much.

Edwards wrote notes to customers on 21 August. “” Indeed, my ankle suffers more than six months, and even though the physio says it is tendinitis, I strongly suspect the other. “

However, these days, Edwards, which is a sharp contradiction in the midst of a widespread rise attitude in Wall Street, does not deny where the market is sitting – especially in the context of technology stocks and in the context of government bond returns.

Based on the claim that the market is on a bubble, he stressed that the technology sector constitutes 37% of the total US market, which was higher than the peak of the DOT-Com balloon in 2000. In the last few years, investors entered the technology in the midst of the crazy excitement of AI.

Another metric showing that the technology sector has historically high values ​​is a falling free cash flow. This means that as technology firms pour money into AI development, existing market prices are higher than the cash flow after expenses. The sector has a return of approximately two people free cash flow. This is also reflected in the S&P 500’s low dividend return of 1.2%.

Meanwhile, long -term government bond returns have also increased with the technology rally and offered almost 4%risk -free returns.

The 10-year Treasury return rate of the market to dividend return has increased to Dot-Com ERA levels.

Historically, increasing bond returns have focused on stock values, but this market has not seen so far. Edwards says it is only a matter of time until it changes.

“Only the other day, interest rates Kaya Dipti and Özkaynak Bulls told us that Sky High Özsermek values ​​were right by Tina – No alternative“he wrote.” But this Tina Magic no longer works, now the interest rates are much higher. So, how can the stock market erase the relentless increase in long bond returns by feeding strong profit news from a handful of Mega-Capak technology stock and the promise of more? “