According to Deep Tide TechFlow news on December 31, as reported by Jin Ten, Jim Paulsen, Chief Investment Strategist of The Leuthold Group, released the latest research report stating that despite widespread concerns about an overheating economy, the U.S. economy is more likely to unexpectedly slow down in 2025, which could trigger at least a 10% adjustment in the stock market. The report shows that current bond yields remain around 4.6%, and the Economic Surprise Index is expected to drop to -35 in the first quarter, with GDP growth potentially slowing from the current 2.7% to below 2%.
Paulsen analyzed several warning signals, including a continuously deteriorating financial conditions index, a relative decrease in the number of rising stocks in the stock market, and weak performance of cyclical stocks. He pointed out that the two slight declines in the financial conditions index over the past 18 months triggered significant market corrections, including the stock market pullback in October 2023 and the collective plunge of the tech 'Seven Giants'.
Nevertheless, Paulsen believes that the bull market is still expected to continue in 2025, but he advises investors to increase defensive allocations and closely monitor the performance of tech stocks. He emphasized that the possibility and extent of adjustments in the U.S. stock market largely depend on the performance of popular tech stocks, as any slowdown in these stocks could bring systemic risks.