Veteran hedge fund manager says stock market is about to get very ugly
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A veteran hedge fund manager has issued a stark warning about the stock market in 2025.
Felix Zulauf, head of the Swiss company Zulauf Consulting, told Barron that next year will be turbulent for Wall Street.
The former hedge fund boss said there will be an extended ‘Santa Claus rally’ if stocks do well on holiday consumer spending, but then there will be a nasty correction, Barron’s reports.
The correction in the S&P 500, the main US index, could be as much as 15 percent, he told the publication.
The market will then rally to reach new highs later in the year, but this will again be followed by a painful bear market, Zulauf argued.
“I think the long-term liquidity indicators suggest we’ll peak in ’25, then drop sharply in ’26, which would mean we’ll probably reach the final top of the market sometime in ’25.” , he said.
Zulauf warned that if the stock market were to plunge, it would hurt the household budgets of individual consumers, which would in turn suck money out of the economy.
“I spend a lot of time in Florida, and I know a lot of those people who are wealthy and have strong balance sheets,” Zulauf said.
Former hedge fund boss Felix Zulauf has predicted a turbulent year for equities in 2025
“And I can tell you that if the market drops 20 percent, they will spend less and cut back. I have seen that in the past and it will continue to be the case in the future.’
But the old Wall Street scion did point to another factor that could mean good news for the financial markets next year.
Over the past century, the years ending in 5 have always been positive for the stock market.
The exception to this rule was 2015, when stocks were down negative 1 percent this year.
While this may seem more like superstition, Zulauf claims that it is actually related to a financial theory called the Juglar Cycle.
Overall, Zulauf remains confident in America, even as the global economy appears increasingly uncertain.
‘The world is not doing well economically. The US is doing well,” he told Barron’s.
‘Europe is more or less stagnant, and I think Europe is in such a mess that there is a structural recession that could last three to four years of stagnation. China is trapped in a deflationary situation and will not get out of it,” he also argued.
The Wall Street scion predicts the S&P 500 could fall as much as 15 percent last year
He also pointed out that Europe will be more vulnerable to the impact of tariffs threatened by newly elected President Donald Trump.
Zulauf pointed out that in recent years the success of the market has become increasingly dependent on the big technology companies, such as Apple, Meta and Tesla.