The veteran investor David Ross expects a bear market in 2025 to emerge smaller than expected reductions interest rates The US economic slowdown and the AI bubble.
“I think one is probably coming bear market but probably in 2025. Now we know what it will cause,” its strategic analyst recently announced Quant strategy on his show Squawk Box Asia CNBC: .
Ross expects the Fed to resist cutting interest rates to the market-desired 3.50 percent. The Fed’s median forecast for 2025 is 4.1%, while almost all market participants currently see interest rates as low as 4.1% through September 2025, according to the tool. CME’s FedWatch tool.
“The second is that the profit will not meet the expectations of investors, because the economy will slow down,” he warned.
The third factor that Ross expects to bring about the bear market is the industry’s “bubble bursting.” artificial intelligence .
It “entered the ground decisively bubble which will be released in the next six months,” the analyst said.
“I think there are several factors that could cause a bear market in 2025, maybe starting later this year,” he said, adding that this forecast does not take into account who wins the U.S. presidential election in November.
His decision Fed Holding interest rates steady at the last meeting was thrown into doubt last week when a worse-than-expected jobs report fueled recession fears, leading to a sharp market sell-off that was also exacerbated by liquidation carry out transactions After the increase in interest rates in Japan.
However, markets recovered sharply as the S&P 500 ended last week down less than 0.1%.
Ross expects the Fed to cut rates by 25 basis points, but argues that this will also lead to a margin squeeze, which will be phased in through 2025.
“If you want the Fed to cut interest rates, then the economy should slow down, h labor market should weaken and profit margins come under pressure“, he announced.
If these factors trigger a bear market, the Fed will have room to deal with it because Fed officials, consumers and politicians have a very low threshold for economic pain, he said.
“The likelihood is that the Fed has plenty of room to cut rates if things turn out to be worse than expected, which it has repeatedly emphasized,” he said.
Whether this could decisively reverse the bear market is uncertain, but will not allow it to become something that will “disrupt and destroy the world economy”;added features.