Large investors warn that the stock market may experience a correction due to surging government bond yields.

Major investors are warning that soaring borrowing costs may trigger a stock market "pullback", with a growing disconnect between the booming stock market and the bond market impacted by inflation concerns. Since the brief ceasefire in the Middle East conflict in early April pushed traders back into the market, the S&P 500 index on Wall Street has continued to rebound, setting consecutive historic highs driven by tech stocks. In contrast, the bond market has seen sell-offs, with long-term US Treasury yields hitting their highest levels since 2007 on Tuesday. Investors are betting that oil prices staying above $100 a barrel will exacerbate inflation and prompt central banks like the Fed to raise interest rates. "We are heading for a pullback to me, the question is not whether it will happen, but when." said Vincent Mortier, Chief Investment Officer at Amundi. Mortier noted that in the past six weeks, the narrative, viewpoints, and positions in the stock market have completely changed; while bond market investors are focusing on the blockade of the Strait of Hormuz by Iran leading to soaring prices of diesel, gasoline, aviation fuel, etc. "The stock market hitting historic highs, narrowing spreads, extreme market optimism... all while interest rates and energy prices are pricing in continued economic shocks, the two are incompatible." said Raphal Thuin, Capital Market strategist at Thik-Hau Capital.