David Roche (David Roche), president and global strategist of Independent Strategy (Independent Strategy), predicted on Monday that the US stock market will bear in 2025 due to factors such as interest rate cuts less than expected, the US economic slowdown, and the artificial intelligence (AI) bubble.

The veteran Wall Street strategist said on a program, “I think [a bear market] may be here, but it may be 2025. We now know what caused it (the arrival of the bears).”

Roach previously worked as a global strategist and head of research at Morgan Stanley.

As for the reasons, Roach thinks there are three main ones. First, he doesn't expect the Federal Reserve to cut interest rates to 3.50% of market expectations (equivalent to cutting interest rates by 25 basis points seven times); second, corporate profits will not meet expectations because the economy will slow down; and the third factor leading to the bear market is the AI industry bubble.

“It (artificial intelligence) has decisively entered the bubble zone, but its momentum will subside in the next six months or so and will be one of the drivers of the economic slowdown.” he said.

He concluded, “I think these three factors are enough to cause US stocks to plummet 20% in the 2025 bear market, which may start as early as the end of this year.”

He also added that the forecast did not take into account who would win the US presidential election in November.

Future of bear markets

It's a coincidence. Analysts at BCA Research, the world's leading independent investment research provider, also warned not long ago that US stocks “will soon peak and a bear market will begin.” According to its report, the reason stocks peaked was that the level of “OTC cash” of US retail investors and investment companies hit a record low, which only explains the “lack of firepower” in the future.

“The US stock market will soon peak and the bear market will begin. Global asset allocators should overallocate government bonds rather than stocks. In addition, dollar cash should also be properly allocated.” the company wrote.

Furthermore, international investment guru Jim Rogers (Jim Rogers), who accurately predicted the 1987 stock market crash and first predicted the US subprime mortgage crisis, once again spoke out and warned investors that a bear market was imminent.

He pointed out in late July that the current US stock market environment shows signs of a decline in the bull market rather than a strong bull market. He expects the US stock market to resume a bear market as soon as the end of the year and no later than next year. He said, “This is the longest bear-free period in US history. We should have come a long time ago.”

Rogers further pointed out that there are a series of worrying signs in the US stock market, such as the influx of new investors into the stock market, declining market breadth, and high levels of debt. These phenomena all indicate that the bull market may be coming to an end.

The Federal Reserve will intervene

Overall, Roach believes that if the above factors trigger a bear market, considering that the pain threshold for Fed officials, consumers, and politicians is very low, the Federal Reserve will step in to intervene.

“If the situation is worse than expected, there is room for the Federal Reserve to cut interest rates drastically. Whether this will decisively reverse the bear market is uncertain, but it will prevent 'disrupting and destroying the world economy' from happening,” he added.

edit/lambor