Investors warn of ‘correction’ risk as high-flying stocks defy bond gloom

1. 1. Big investors are warning that soaring borrowing costs could trigger a significant "correction" in the stock market, highlighting a growing disconnect with bond markets.
2. 2. US long-term bond yields have climbed to their highest levels since 2007, with the 30-year Treasury yield reaching a 19-year high of 5.2%.
3. 3. The S&P 500 stock index has recorded multiple record highs, gaining over 12% since an April Middle East ceasefire, largely powered by a tech rebound.
4. 4. Vincent Mortier, Chief Investment Officer of Amundi, predicts a stock market correction is a matter of "when, not if," noting a rapid shift in equity market narratives.
5. 5. Raphaël Thuin of Tikehau Capital identifies an "incompatibility" between record-high equities, tight credit spreads, and market pricing for lasting economic impacts from interest rates and energy.
6. 6. A Bank of America poll revealed a record surge in fund managers overweighting equities (net 50%) and underweighting bonds (net 44%), suggesting conditions are "ripe for profit-taking."
7. 7. The current Wall Street stock rally exhibits significant dependence on a few technology and AI-linked semiconductor stocks, diverging from European markets.
8. 8. While some investors believe strong first-quarter earnings justify the rally, an asset management executive warns bonds are signaling a "yellow flag" for chronic inflation and economic slowdown.