"Many market commentators are pointing out that U.S. inflation expectations have now slid to levels that previously triggered the Federal Reserve to enact quantitative easing, yet there seems to be absolutely no prospect of that occurring currently," he said.
Edwards also warned that this third-quarter earnings season, which unofficially kicked off with Alcoa's results on Wednesday, could prove "very tricky".
"U.S. companies have been playing their usual games in the run up to the reporting season by ramping down EPS (earnings per share) expectations so they can beat the numbers on the day," he said.
A higher-than-average number of S&P 500 companies have cut their EPS estimates over the third quarter, according to data provider Factset. EPS estimates have dropped 4.2 percent (to $29.06 from $30.33) during the quarter, above the average 3.2 percent decline seen over the past year, according to its data.
Edwards argued his concerns might soon be borne out in stock markets.
"Certainly you can feel the increasing nervousness in the market. Volatilities are definitely on the rise," he warned.
However, the three-year Wall Street rally is testament to the fact that Edwards does not always get it right.
In September 2012, he announced the U.S. was in recession and Wall Street would soon react, and warned of an "ultimate" death cross for the S&P 500—where the 50-month moving average falls below the 200-month moving average.
Instead the S&P 500 continued to rally, and has gained around 40 percent since Edwards' pronouncement.
"Am I calling a top? What's the point? As an uber-bear I am used to being called a stopped clock," Edwards wrote on Thursday.