Veteran Trader Warns: US Stock Market May Be Near Breaking Point

TLDR

• Todd Horwitz warns that the US stock market may experience a sharp correction of up to 60%.
• He believes that the current market is supported by weak assumptions and overestimated economic strength.
• Horwitz says falling merger activity and banking stress indicate a late-stage market cycle.
• He argues that rate cuts will benefit banks and the government but not households or workers.
• Horwitz highlights that inflation and weak wage growth are reducing consumer power and earnings potential.

Veteran trader Todd Horwitz has warned of a possible crash in the US stock market, citing economic and structural weaknesses. He argued that market resilience is being misjudged and pointed to multiple stress points fueling long-term risks.

US Stock Market Faces Pressure From All Sides

Horwitz said the US stock market is under pressure from several directions, not just one specific catalyst. He pointed to falling merger activity and ongoing concerns within the banking sector. These, he said, are signs of a market in its late-cycle phase.

He stated that current market strength is misleading because headline indices do not reflect underlying economic conditions. “The environment today looks more like stagflation than a recovery,” Horwitz said in his recent comments. He emphasized that optimism is masking deeper vulnerabilities across labor, policy, and corporate fundamentals.

He added that assumptions supporting market valuations may be weak, especially given the current debt levels and consumer trends. He believes that without strong earnings, markets cannot sustain these levels. Therefore, Horwitz expects a long correction, not a quick collapse.

Monetary Policy and Inflation Pressures Worsen Risks

Horwitz argued that upcoming interest rate cuts will not support households, but instead will ease government borrowing burdens. He said rate cuts would help banks and federal financing while doing little to address real wage issues. “Lower borrowing costs won’t offset weak wage growth or rising living expenses,” he explained.

He warned that looser policy might increase inflationary pressure and prolong current imbalances rather than solve them. Without strong spending control, he believes these policies will only deepen economic instability. As debt rises, he said, the market remains vulnerable.

Horwitz also criticized assumptions that monetary easing will stabilize equity markets. In his view, those expectations ignore the structural damage in wage growth and consumer strength. That, he noted, weakens any recovery argument tied to easier monetary policy.

AI, Job Losses, and Corporate Earnings Add to Strain

Horwitz flagged employment trends as another weak spot, linking job losses to rapid AI integration across industries. He warned that workers displaced by automation may not easily return to the workforce. This, he stated, would cut consumer spending and reduce earnings.

He believes these trends are different from past cycles due to the speed of technological change. As a result, he expects job displacement to rise quickly without enough new opportunities. That loss of income, he added, will drag down broader economic activity.

Horwitz also questioned the strength of AI-driven firms like Nvidia, citing concerns about aggressive spending. He stated that internal investment is distorting real profitability. If funding tightens or demand slows, he warned that valuations may fall fast.

He believes that investor enthusiasm is masking real challenges behind these companies’ growth stories. Citing Michael Burry’s past concerns, Horwitz said the risks in tech valuations remain underpriced. These companies, he added, may not withstand a market shift.

Despite his bearish stance, Horwitz said he is still active in the markets using hedging and exposure to gold. He prefers options strategies to manage risk without fully exiting. This, he noted, allows him to limit downside while remaining invested.

Horwitz concluded by warning that future government responses may involve broader interventions like universal basic income. He said current conditions offer very little margin for error. He emphasized that preparation, not panic, should guide investment decisions.

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