Albert Edwards thinks the equity bull market’s reached “peak nonsense.”

Critics would tell you Albert’s a man who knows a thing or twelve about “nonsense.” In fact, humorless humorist and PPP recipient Josh Brown might argue Edwards is among the world’s foremost authorities on “nonsense.” (Brown, the only man on Earth who’s both a television anchor and a CEO, has sharply criticized Edwards over the years.)

Personally, I don’t think Albert deliberately traffics in injurious nonsense, but he does read, and occasionally cites, some web portals that do. I’m quite sure of that. I used to co-edit one of those portals, and he read it religiously. So, by the way, did Brown. (What can I say that I haven’t already said? “Some folks got duped.” And the world’s still payin’ for it. Sorry about that. At least I quit.)

Aaaaanyway, I like Edwards, even if my former “mentor” might’ve convinced him not to like me. The saving grace with Albert is that unlike Brown (who became a laughingstock the very second he started to take himself seriously), Albert’s in on his own joke. As he put it Wednesday, in his latest monthly weekly (get it?),

[M]y own 45 years of market commentary is littered with predictions that turned out badly. [I]t is an occupational hazard in this business, especially for an über bear.

That understates the case, and on multiple vectors. As I’m always keen to remind readers, Albert’s truly one of a kind. You simply don’t survive as a research analyst (“strategist”) at a G-SIB making the kind of predictions Edwards makes on a regular basis and with a straight face.

That he’s still around is a testament to… well, in the first instance it’s a testament to the idea that he doesn’t want to retire, because he surely could. Beyond that, it speaks to Albert’s unique ability to be both completely serious and completely unserious at the same time. His notes are both tongue-in-cheek and not. As long as you know that, there’s more to gain from reading them than there is to lose.

That’s the lens through which you should assess Albert’s claim that 2026 will go down in the annals of market history as “peak nonsense,” taking its place beside 1999 and 2007.

“We’ve reached [a point] where I actually laugh out loud reading some of the arguments used to justify the equity bull market,” Edwards said Wednesday. “I felt the same bemused incredulity in 2007 and before that in 1999. It’s that time in the cycle again!”

Unlike some (a lot?) of Albert’s late-career missives, it was easy enough to discern the point of his September 30 note: Bond yields still matter for stocks, equities’ resilience in the face of five-handle (soon to be six-handle?) longer-end Treasury yields notwithstanding.

“[T]here is a point in the cycle where these sorts of mind-bending comments begin to appear,” Edwards said, referring to the contention that stock investors need no longer concern themselves with bond yields. When you see or hear those sorts of comments, “a 50%+” correction for equities may be right around the corner, he went on.

Edwards pointed out that in fact, rising yields have already impacted stocks. As discussed here and here, breadth has deteriorated dramatically and the index has de-rated meaningfully. But that de-rating can also be explained by booming profits and lofty expectations for EPS growth going forward.

The (potential) problem is that expectations are just that: Expectations. If they don’t pan out, there’s a long way down. “You’ll likely need profits to keep growing by c.40% to withstand the impact of rising bond yields,” Albert said. “Otherwise equities are in trouble.”

The figure on the left, below, shows you the ratio of forward to trailing profits. It’s, um, quite high, particularly for Tech. As Edwards put it, “We all know what has sustained equity prices this year: Expectations of rip-roaring, AI-led profits growth.”

The figure on the right’s useful: It gives you some historical context for this year’s much ballyhooed multiple compression. “Despite this year’s equity P/E de-rating, long-term ratios leave equities still looking expensive,” Albert wrote.

Across five pages (a veritable marathon for Edwards these days), Albert touched on everything from crack spreads to the disparity between spot and paper oil (i.e., Dated Brent versus futures) to bond-stock correlations to corporates’ immunity from rising rates thanks to the terming out of debt in the immediate aftermath of COVID.

His overarching point, though, is that the inexorable rise in bond yields is going to catch up to stocks eventually. And when it does, the latter are going to crash. Maybe by 50% or more.

Before you jump off a bridge, don’t forget Albert’s self-deprecatory disclaimer, quoted above. Despite running just two-dozen or so words, it’s eminently more candid than the three-page corporate repudiation attached to the end of Edwards’s Wednesday note.