U.S. Stock Market to Enter Bear Territory by 2025?

David Roche, President and Global Strategist of Independent Strategy forecasted on Monday that the U.S. stock market will enter a bear market by 2025, catalyzed by factors such as less-than-expected interest rate cuts, a slowdown in the U.S. economy, and an artificial intelligence bubble.

The veteran Wall Street strategist said: I think [a bear market] is probably coming, but probably in 2025. We now know what will cause it.

Roche, who previously served as Morgan Stanley's Global Strategist and Head of Research, identified three main reasons. First, he anticipates that the Federal Reserve will not cut rates to the 3.50% expected by the market (equivalent to seven 25 basis point cuts); second, corporate profits will not meet expectations due to an economic slowdown; the third factor leading to a bear market is the AI industry bubble.

According to Roche, AI has entered bubble terrain decisively, but its momentum will subside in about six months and will become one of the drivers of the economic slowdown.

He concluded, I think there is enough in those three factors to cause a bear market of minus 20% in 2025, maybe starting at the end of this year.

Roche also added that this forecast does not take into account who will win the U.S. presidential election in November.

Coincidentally, analysts from BCA Research, a leading global independent investment research provider, also recently warned that the U.S. stock market will soon peak, and the bear market will begin. Their report points out that the reason for the stock market peak is that the cash on the sidelines level of U.S. retail investors and investment firms has hit a historical low, which can only indicate insufficient firepower for the follow-up.

Furthermore, international investment master Jim Rogers, who accurately predicted the 1987 stock market crash and was the first to predict the U.S. subprime mortgage crisis, also spoke up again, warning investors that a bear market was coming.

He pointed out in late July that the current environment of the U.S. stock market shows signs of a bull market decline rather than a strong bull market, and he expects the U.S. stock market to return to a bear market by the end of this year at the earliest and next year at the latest. He said, America and the world are long overdue for a problem.

Rogers also further pointed out that there are a series of worrying signs in the U.S. stock market, such as a large influx of new investors into the stock market, a decline in market breadth, and high levels of debt. These phenomena all indicate that the bull market may be about to end.

Overall, Roche believes that if the above factors trigger a bear market, considering the Federal Reserve officials, consumers, and politicians have a very low pain threshold, the Federal Reserve will intervene.

The likelihood is [that] the Fed has plenty of room to cut rates if things turn out worse than expected, and it has repeatedly said so, he added.