Famed bear warns of market 'shock' as inflation risks rise

Albert Edwards, a longtime permabear and global strategist at Société Générale, says investors should brace for another market "shock." He argued that many investors remain too complacent about the risk of higher inflation. Edwards noted oil is retesting the $100-a-barrel mark as conflict in the Middle East continues, while the 5-year 5-forward — a measure of five-year inflation expectations five years out — has only ticked up slightly to 2.1% this week, Fed data show.

He warned that this muted reaction leaves markets vulnerable. "Investor complacency invites a market shock," Edwards wrote, adding that higher inflation tends to raise bond yields, which in turn hurts bond prices. The 10-year US Treasury yield has climbed 29 basis points since the start of the US-Iran war, and Edwards said higher inflation that pushes yields up will most likely push equity prices lower.

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