SocGen Albert Edwards The ingredients for a market accident are falling into place

GLOBAL STRATEGY ALTERNATIVE VIEW 20 August 2026

Global Strategy Weekly The ingredients for a market ‘accident’ are falling into place

Albert Edwards The financial press abounds with headlines about G7 long bond yields breaking higher to levels not seen for decades. We will soon hear the groans of the financial plumbing straining under the pressure. But higher yields alone are unlikely to catalyse an end to the AI-driven equity bull market. But the scenario does leave equity investors increasingly vulnerable to ‘bad’ news such as a downturn in heady profits optimism.

 Just as well I have a long memory, for I can remember exactly what was happening in financial markets the last time French and US long bond yields were at these levels c.2007 and even further back to c.1997 for Japanese and UK yields.  The breakdown of the Iran/US negotiations has been the immediate catalyst for higher yields this week. But because the US is seen as the centre of the financial universe, most commentators have also identified other key drivers: the obscenely high US budget deficit coupled with the surge in AI-related issuance to fund soaring fixed investment draining ‘excess’ liquidity away from financial assets. Many also believe US bonds are having a tantrum because new Fed Chair Kevin Warsh refuses to spoon-feed investors with the forward guidance they had become accustomed to.  By contrast, we have also been highlighting on these pages how the relentless surge (normalisation?) in Japanese 10y+ yields is a key driver for the rise in global long bond yields. This week saw another sudden lurch up with the 10y almost touching 3%, last seen in 1996 when I was writing about Noddynomics and the impending collapse in the Asian tigers. And true to form, I’m still seeing impending collapse just around the corner.

 Amid the focus on relentlessly rising bond yields, not so many commentators bothered suggesting the equity bull market could be broken by this trend, mainly because the AI-driven equity boom seems to have taken on a life of its own – seemingly impervious to shocks.  One of the few things I have learnt in my 44 years in the markets is that although stretched equity market valuations will not in itself trigger a bear market, it most certainly leaves the market more vulnerable to ‘bad’ news. The key for investors is to think about what the trigger might be and monitor sentiment and momentum indicators to confirm if other market participants have changed their minds about their exuberance - irrational or not. On many key measures the US equity market has rapidly surged to nosebleed valuations: US 30y bond yield/equity dividend yield

Global Strategy ‘Team’ Albert Edwards (

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This chart has certainly done the rounds in recent days. For me rising JGB yields continues to be a key driver – link. The benign sideways move in US yields has now ended with a breakout. Long bond yields trending higher everywhere

Unlike the US 30y, the 10y yield is still range trading and has yet to break above recent highs - the key 5% level seen in January 2025. But be aware that one key momentum indicator technical analysts use has broken higher, sending a bearish bond signal: the Macd momentum measure shown breaking higher in the lower pane below is defined here by our friends at Fidelity. US 10y monthly yields Macd has broken upwards (bottom pane)

Did you notice in the bond chart above how, in contrast to the G7, China’s yield is falling again. An FT headline this week was China 10y yield fell to a 13-month low - link! Wow.

The economic news in China continues to be very weak: New bank loans fell in July