HomeMarket NewsWhy the US market could correct 20% in 2025: Mark Matthews of Bank Julius Baer explains
The global market expert pointed out that the US market has risen 60% in the last two years, making it expensive. It has only been this overvalued twice before in history, which increases its vulnerability to a correction.
The US equity market could see a 20% correction in 2025, according to Mark Matthews of Bank Julius Baer & Co. He cites high valuations, narrow market breadth, and inflation risks as the key reasons behind his prediction.
“The market is expensive. It has only been this expensive twice before—the dot-com bubble and the pandemic stimulus bubble,” Matthews said.
He pointed to weak market breadth, with less than 40% of S&P 500 companies trading above their 50-day moving averages, as another sign of vulnerability.
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Matthews also highlighted the Federal Reserve’s concerns about inflation as a significant risk. “In the latest summary of economic projections, the number of Fed officials who saw upside risk to inflation jumped from three in September to 15 out of 19. That’s a significant shift,” he said.
If inflation remains persistent, the Fed could pause rate cuts or even tighten policy, further pressuring markets.
While the US economy remains resilient, with 3.1% GDP growth in the last quarter, Matthews cautioned against underestimating the unpredictability of recessions.
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Despite Donald Trump’s pro-growth stance, the past pro-market presidents have also faced recessions during their terms, he noted.
With Trump’s return, markets would focus on potential tax cuts, deregulation, and spending reductions. “If they can achieve even 20% of what they’re proposing, it could be accretive to US GDP growth and inflation,” he explained.
However, Trump’s trade policies, including tariff threats, could introduce additional uncertainties for global markets.
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Matthews also commented on the ripple effects of a US correction.
“In a major US market fall exceeding 20%, it’s hard to see India or other markets holding up. If the US goes into a bear market, I can’t recall any previous instances where India didn’t go down as well,” he said.
For the full interview, watch the accompanying video
