The recent rise in shares is a “sucker rally”, according to chief investment officer Peter Toogood. The CIO of British financial firm Embark Group said he now expects a decline in US stocks, after the S & P 500 rose 14% since the start of October. Toogood said he is concerned about valuations since U.S. stocks tend to trade at a P/E (price-to-earnings) multiple of 20x but yield an average of 5% annually. This compares to European stocks which are yielding 8% or 9% on a P/E of 1[ads1]0x or 11x, he said. .SPX 1Y line “It’s probably been a rally for a while, is my best guess,” Toogood said. “You have a nice little bear market in the US” Toogood also warned that the S&P 500 could potentially see big drops in the near future. “It should probably be around 3200-3300,” he said. That’s down about 20% from Friday’s close of 4,045. The CIO said he was bearish on US stocks as cash yields had risen above bond yields in recent weeks. The Federal Funds effective rate reached 4.57% on March 1 – higher than the yield on bonds with maturities over 5 years. However, the premium for bearing the risk of investing in shares has not risen at the same time, according to Toogood. This means that shares must either become cheaper to compensate for the increased risk, or risk premiums (and bond yields) must fall to maintain the current share price. Bond prices – and their yields – also partially reflect future expectations of the rate of inflation. Toogood said inflation concerns could continue to weigh on the market as supply chain disruptions are not fully resolved. “You have full employment … Put another way, you still have sticky inflation,” Toogood told CNBC’s “Squawk Box Europe.” Consumer prices have fallen from their peaks but remain high, and strategists say we have a “way to go.” Meanwhile, logistics executives warn of a persistent source of supply chain inflation due to an imbalance between inventory supply and demand. “I don’t think the supply chains have settled down particularly and the service sector definitely has supply issues,” Toogood added.