Stocks are in a late-stage bubble and poised to crash 21% next year, analyst says

Key Points:

• Senior markets economist James Reilly forecasts the S&P 500 to rise 7.7% to 8,250 by the end of 2024, followed by a 21% plunge to 6,500 by the end of 2027, citing signs of a late-stage stock market bubble.
• Reilly highlights bubble indicators such as stock valuations near dotcom peaks, unsustainable expected earnings growth, negative free cash flow in top AI companies by 2027, extreme market-cap concentration, and booming equity issuance signaling a bubble's imminent end.
• Rockefeller International Chairman Ruchir Sharma warns that a decisive breach of the 10-year Treasury yield above 5% could burst the AI investment bubble by increasing borrowing costs, making funding AI projects more difficult and exacerbating national debt sustainability issues.
• Sharma emphasizes that rising yields above 5% would hinder both bond issuance and equity financing for AI hyperscalers, while higher public borrowing costs will pressure other borrowers and strain the already high U.S. debt burden exceeding 100% of GDP.
• Wall Street veteran Ed Yardeni has become more cautious, lowering his bullish "Roaring 2020s" scenario odds from 80% to 70% and increasing the chance of a bearish market outcome to 30%, citing unsettling developments in oil and bond markets.