David Roche, an experienced investor and market watcher, has released a warning for 2025. He predicts a possible bear market.
Roche, an expert with Quantum Strategy and a leading figure in the field of artificial intelligence, says that the bubble growing around AI is a major factor which could lead to a market crash.
Roche says that the current exuberance around AI could lead to a sudden correction. The S&P 500 may fall up to 20 percent from its highs.
David Roche predicts that the Fed will lower interest rates
David Roche also expects the Federal Reserve to lower interest rates at a smaller-than-expected pace.
He said that the US central Bank is only planning to reduce rates by 4.1% in the next 17-months, but market participants are expecting them to fall to 3.50% levels before the end of the year 2025.
FOMC has decided to leave interest rates the same this month. This decision was criticized after weaker than expected jobs numbers heightened fears of an American economic slowdown.
Jerome Powell, the chair, confirmed that, if inflation continues on its present path, a rate reduction in September will be considered. Roche’s bear-market forecast does not take into account the results of the November 2024 US Presidential elections.
Roche predicts an imminent economic downturn
Roche’s skepticism goes beyond the monetary policies to include broader economic situations. He predicts that the economic slowdown will negatively impact on corporate profits.
Roche warns that as the economy slows down, earnings may not meet expectations, leading to a downward revision and concerns about valuation.
Investors can lose confidence in equities if corporate earnings are disappointing. They may also switch to more secure assets.
Reduced profits can also lead to reduced hiring and capital spending, which will further slow down economic growth.
The shift away from growth to defensive stocks could increase the pressure on the market indexes and exacerbate this downturn.
David Roche’s warning about a possible bear market by 2025 underscores growing concerns over the sustainability of AI-driven markets and the impact monetary policy has on economic stability.
Roche’s insight serves as a warning to investors who are weighing the risk of a possible correction. It also reminds them of the volatile nature of periods of rapid growth in the market and of the need to remain cautious when the economic environment is changing.
David Roche warned of a potential bear market by 2025 due to AI bubble concerns in this post first appeared on The ICD
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