Chris Vermeulen, Chief Investment Officer (CIO) of Technical Traders, suggests that this could result in a bear market and a challenging “reset” that might adversely affect returns for years to come.

What Happened: Vermeulen highlighted the recent surge in defensive assets such as precious metals, energy stocks, and industrial stocks, in an interview with Bloomberg on Tuesday.

These sectors typically perform well in the late stages of a bull market, signaling an impending bear market or financial reset.

The CIO predicted that investors could face significant stock losses, with wealth potentially decreasing by 30%-50% over the next year. He also suggested that this reset could coincide with a recession, particularly indicated by industrial stocks, which have been hitting all-time highs.

“I think we’re coming into a major market top, more or less a financial reset,” Vermeulen said in the interview. “It’s short-term, temporarily painful. But we need markets to reset. We need regular pullbacks and corrections in order for the market to keep going up.” 

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Vermeulen expressed concern that U.S. firms may not be aware that the end of an economic growth cycle is approaching, and the industrial sector could soon start to slow down.

These warnings come amid ongoing concerns about a potential recession, with the New York Fed estimating a 58% chance of the economy tipping into a recession by March of next year.

Why It Matters: Despite Vermeulen’s warnings, some experts remain optimistic about the stock market’s future. For instance, Wall Street veterans have dismissed recent concerns, citing a robust U.S. economy and the potential of artificial intelligence (AI) as key drivers for the market’s continuation.

Similarly, the stock market’s long-term bull rally, now in its 11th year, is predicted to continue, with the S&P 500 potentially surging by 34% by the end of 2026.

However, some analysts, such as those at Ned Davis Research (NDR), have cautioned that the current market conditions could lead to a correction, making it vulnerable to potential corrections due to prolonged market enthusiasm.

Meanwhile, CNBC host Jim Cramer has outlined potential factors that could lead to a further market decline, advising investors to be cautious about their buying and selling decisions.

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