Providence: Investors are warning that lofty US stock markets have not yet priced in the risk of rocketing inflation and are vulnerable to a sharp spike in bond yields. Equity markets have been propelled by robust first-quarter earnings and expectations of boosts from artificial intelligence, overshadowing the risk of high energy prices and the lack of a conclusion to the war with Iran.But a spike in bond market yields over the past week-which took the 30-year treasury bond above 5% and benchmark 10-year bonds above 4.5%-could change the picture for investors. That caused stock market caution on Friday.Paul Karger, co-founder and managing partner of TwinFocus, who manages money for ultra-high net worth families, said his clients are bombarding him with questions every time he meets with them about how to make sense of the apparent market paradox.Bond yield spike puts equities market at riskInvestors warn that US stock markets are not reflecting inflation risks. High energy prices and the Iran conflict are overlooked. A recent spike in bond yields is causing caution. Experts note a market paradox with strong earnings but negative inflation signals. Clients are seeking clarity on this divided outlook. This situation could impact company profits and economic growth."Breakfast, lunch and dinner: the question is always about how to make sense of the fact that this is such a divided outlook," with earnings telling a positive story but oil prices and inflation emerging as a negative for companies, Karger said.Karger has what he calls a "barbell" approach to assets he manages: accumulating big overweight positions in cash, gold and other commodities, while maintaining positions in the market-leading mega-cap growth stocks.After an initial swoon following the start of the US-Israeli war with Iran in late February, US stock indexes have mounted a sharp rebound. The benchmark S&P 500 was last up more than 17% since its low for the year in late March, giving it a year-to-date gain of over 8% - even with Friday's pullback of nearly 1%. Rising benchmark yields tend to put pressure on equity valuations, as companies and consumers will face higher borrowing costs. This can also weigh on economic growth and corporate profits, while making bond returns more competitive with stocks.That may especially be the case now with the stock market at elevated levels. The benchmark S&P 500 as of Thursday was trading at 21.3 times earnings estimates for the next 12 months, according to LSEG Datastream.