America's Stock-Market Boom to End in 2025: Rockefeller Chairman Warns of Market Punishment for Yawning Deficits

The U.S. stock market's remarkable run may be coming to an end, according to Ruchir Sharma, chair of Rockefeller Capital Management. In a recent article for the Financial Times, Sharma warned that markets will eventually punish the U.S. for its yawning deficits, leading to a correction in 2025. As the U.S. government's debt-to-GDP ratio continues to rise, investors may lose confidence in the country's fiscal sustainability, driving up borrowing costs and potentially triggering a market downturn.

Sharma's concerns are not unfounded. The U.S. federal budget deficit is projected to reach $2 trillion in 2024, with the debt-to-GDP ratio expected to surpass 120% by 2034, according to the Congressional Budget Office (CBO). This fiscal trajectory, combined with the Federal Reserve's recent projection of fewer rate cuts in 2025, could lead to higher interest rates and increased borrowing costs for the U.S. government. As a result, investors may demand higher risk premiums, driving up yields on U.S. Treasury securities and making it more expensive for the government to finance its deficits.



Investors should be mindful of the risks associated with high debt levels and wide deficits, as they could impact the performance of their portfolios. To mitigate these risks, investors may consider diversifying their portfolios by adding non-U.S. dollar denominated assets and "real assets" such as infrastructure, gold, and commodities. Additionally, focusing on tax efficiency for U.S. taxpayers could be prudent.

In conclusion, while the U.S. stock market has enjoyed a remarkable run in recent years, investors should be aware of the potential risks associated with the country's fiscal trajectory. As the U.S. government's debt-to-GDP ratio continues to rise, investors may lose confidence in the country's fiscal sustainability, driving up borrowing costs and potentially triggering a market downturn. By diversifying their portfolios and focusing on tax efficiency, investors can better position themselves to navigate the challenges that lie ahead.