Stock Market Boom to Snap in 2025 As Debt Markets Punish US: Ruchir Sharma

• The trend of US stocks outperforming the rest of the world may come to an end in 2025, Ruchir Sharma said.
• The Rockefeller chairman pointed to signs that the stock rally in the US looked unsustainable.
• Investors’ growing attention to rising deficits in the US may be a turning point, he said.

The stock market’s momentum looks likely to sputter in 2025, and it could begin to falter as investors grow wary of the US’s mounting debt problems, according to market expert Ruchir Sharma.

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In an op-ed for the Financial Times on Monday, the Rockefeller International chairman said he believed the US stock market could soon underperform global peers, breaking a long-running trend of US outperformance.

Over the next 12 months, the top stocks in the US could underperform the global market by around 10%, he estimated — reflecting a much worse performance than in 2024, when the top US stocks outperformed the market by around 20%.

“Momentum investing looks poised to crash in a way that could hit many investors hard,” Sharma wrote.

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Speaking to CNBC later on Monday, Sharma pointed to signs that the trend of US outpeformance looked unsustainable.

For one, valuations in the US remain high, yet sentiment is more bullish compared to other areas of the world.

The US economy makes up around 30% of the global economy, but US stocks make up around 70% of the global equity market, Sharma said. Still, nearly all investors expect the US to keep outperforming the rest of the world

“I’ve never seen such strong group-think revealed. Which is that at the start of this year, it’s almost that everyone seems to have the same view, which is that the American stock market will keep outperforming … that the AI trend and mania will continue with the big tech companies benefiting,” Sharma said.

“I ‘d be shocked if the group-think is so right as it is now, with its strong conviction of US outperformance,” he later added.

US stocks could see their performance weaken when the market finally turns its attention to mounting debt levels in the US, Sharma speculated.

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The federal debt clocked in at $36.1 trillion as of Monday, according to data from the US Treasury Department.

Until now, the US has been given a “free pass” for its high level of borrowing, given that the dollar is the world’s leading reserve currency, Sharma said.

But, with more long-dated US Treasury supply poised to hit the market in the coming months, investors may start “punishing” the US for its deficits, with demand at future Treasury auctions potentially weakening, he wrote in the op-ed.

Bond market vigilantes — traders who try to force the government to exercise more fiscal constraint by staging a sell-off or refusing to buy government bonds — have already started to make their mark in other areas of the world, like Brazil and France.

“There’s no country in the world today running a deficit number like the US is running, and that has been artificially propping up growth,” Sharma said, adding that debt was the “leading trigger” to ending the US momentum trade. “That could begin to really prick markets.”

Sharma has sounded the alarm for major stock correction before. In a previous op-ed, he warned that the US market looked like it was in the “mother of all bubbles,”though most forecasters on Wall Street expect another positive year for stocks in 2025.