Economists warn that three major "bull market drivers" are weakening, is the US stock market frenzy coming to an end?

According to Zhitong Finance, American economist David Rosenberg warned clients in a report on Wednesday that the main factors driving the significant rise of the U.S. stock market over the past 30 years are nearing extremes, indicating that future returns will be significantly lower, and investors should prepare for limited gains in the U.S. stock market for the foreseeable future. Rosenberg particularly focused on recent trends in valuations, interest rates, and taxes. According to Rosenberg, these factors have reached their limits, which could put downward pressure on corporate earnings and, in turn, affect stock prices. Rosenberg stated, "The momentum in the stock market is running out." Stock Valuation Rosenberg pointed out that the forward price-to-earnings ratio of the S&P 500 is 22.3 times, more than one standard deviation above its historical average, and the highest level since the peak of the pandemic tech stock surge in 2021. Such a high valuation, combined with extremely bullish sentiment that has surpassed pre-financial crisis levels, leads Rosenberg to believe that there is little room for further valuation increases, stating, "There is no further multiple expansion space." Higher stock market valuations will largely depend on the continued growth of corporate earnings, but Rosenberg indicated that there is reason to believe this is unlikely. Tax Rates For decades, the U.S. corporate tax rate has been declining, boosting corporate profits and helping to drive up stock prices. While Trump's deal hinges on potential legislation to lower the corporate tax rate from 21% to 15%, Rosenberg believes this is unlikely. He argues that given the current effective corporate tax rate of 17%, there is almost no room for further decline, even if the Republicans control the White House and Congress. Interest Rates For a long time, declining interest rates have helped drive up the U.S. stock market, but this trend may be coming to an end. Although the Federal Reserve is cutting rates, interest rates are already at historical lows, indicating that there is little room for further declines, especially if the agenda of the elected president Trump could push inflation higher. Rosenberg stated, "Although interest rates are higher than the historical lows of 2021, they are still at the low end of the historical range. The current yield on the 10-year U.S. Treasury bond is 4.3%, less than half of the average level of 10.6% in the 1980s." In summary, Rosenberg stated that unless operating profits, excluding the impact of taxes and interest expenses, rise significantly, it is unlikely that the U.S. stock market will see substantial increases in the future. Rosenberg added, "Consumers are increasingly focused on costs, and net profit margins are at historical highs, making it seem like a daunting task to improve profit margins. The three levers for current price returns are close to reaching their limits."