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Joe CiolliApr 11, 2018, 10.03 PM While you were all watching the latest developments in President Donald Trump's global trade war - or perhaps his latest tiff with Russia - Albert Edwards was focusing on something else entirely.

The outspoken Societe Generale global strategist was watching the National Federation of Independent Businesses (NFIB) small business survey, whose results Tuesday threw further fuel onto his already-bearish market view. Edwards argues sentiment is getting overheated and indicating "extreme optimism, if not euphoria."

This is particularly important in the context of the labor market, considering inflation - and, by extension, wage inflation - is arguably the most important input for the Federal Reserve as it decides how quickly to raise interest rates.

"Extreme labor market tightness and mounting wage/price pressures are all too apparent in the NFIB survey," Edwards wrote in a recent client note. "The Fed will continue tightening until something snaps, for that is the norm."

Societe Generale

While the whole statement is ominous, it's the part about something snapping that should have traders worried. That's because before a global trade war became the biggest concern for investors, overheating inflation was seen as the most likely cause of a market meltdown.

This is particularly true as it pertains to stocks. With valuations sitting near record levels, they're especially vulnerable, and will lose appeal relative to bonds as interest rates rise. That's why any past signs of runaway inflation have resulted in sharp equity losses.

With all of this in mind, it's important to note that Edwards is among the most bearish strategists on Wall Street. He pens doomsaying research reports multiple times a month, each time going deep into what he sees as cracks in the market's foundation.

Two weeks ago, he argued a US recession could be closer than anyone expects, citing a surprising pace of weakening economic data. A couple weeks before that, Edwards made a similar argument, although that time he honed in on Trump's volatile trade policy.

Regardless of which reason Edwards floats in a given report, one thing is certain: He sees a reckoning coming, and soon. And while he acknowledges that his repeated bearish proclamations have pushed him to the fringe of market punditry, he claims his camp is growing.

"It is not just extreme bears such as me who see that the equity market is in trouble," said Edwards. "That in turn spells trouble for the consumer who has needed the backdrop of an equity bubble to sustain even mediocre consumption."

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