Bear market coming in 2025? Wall Street veteran warns: Three major factors may lead to a 20% drop in US stocks

After experiencing major turbulence in global stock markets, a Wall Street veteran warns that the bear market in US stocks may arrive in 2025. He believes that the three main reasons triggering a 20% drop in US stocks are Fed rate cuts falling short of expectations, a slowdown in the US economy, and an AI bubble.On August 12, David Roche, a senior investor on Wall Street and Quantum Strategy strategist, stated in an interview, "I think (the bear market) may be imminent, but in 2025. We now know what caused the bear market."Roche speculates that the Fed will not cut rates to the market's expected level of 3.50%, but is more likely to keep rates around 4.1%. According to CME's FedWatch data, almost all market participants expect that by September 2025, the Fed will lower rates to below 4.1%.The seasoned investor also warned that due to the slowdown in the US economy, corporate profits may not meet expectations, further increasing the likelihood of a bear market. Additionally, Roche believes that the field of artificial intelligence has clearly entered a bubble phase and is likely to burst in the next six months, which is also one of the reasons for the slowdown in US economic growth.He added, "These factors may lead to a 20% decline in US stocks in 2025, and the market may even start turning bearish from the end of this year. However, this prediction does not take into account who will win the US presidential election in November."However, David Roche also pointed out that the Fed still has room to address a potential bear market.He stated, "Fed officials, consumers, and politicians have a very low tolerance for (stock market) pain, so the Fed may take action to prevent the bear market from worsening. Although it is uncertain whether the Fed's actions can completely reverse the bear market, Roche believes that Fed intervention can prevent the bear market from evolving into a more serious crisis that could 'disrupt and destroy the world economy'."He said, "It is very likely that if things are worse than expected, the Fed will have enough room to cut rates, as has been repeatedly mentioned."