Joachim Klement, head of market strategy at Panmure Liberum, predicts the S&P 500 will drop to 5,000 points by the end of 2027. This forecast represents a 36% decline from the index's closing value of 7,801.77 on October 7. Previously, Klement expected the index to reach 8,300 by the same date.
The strategist attributes his bearish outlook to rising borrowing costs and persistent inflation, which may threaten the expansion of artificial intelligence infrastructure. He notes that hyperscalers have largely exhausted their free cash flow. Bloomberg Intelligence estimates that capital expenditure for data centers could exceed $713 billion in 2026.
Klement anticipates the potential collapse of the AI bubble between 2027 and 2028. He plans to shift to a defensive investment strategy, focusing on food, tobacco, and pharmaceutical stocks, if the S&P 500 falls below its 200-day moving average. This indicator last triggered a signal in March.
While other strategists tracked by Bloomberg project an average upside of 14% for the index, Klement remains the most pessimistic. Investors like Ray Dalio and Temasek International have also identified the AI sector as a potential bubble. Conversely, Barclays maintains a target of 8,800 for the S&P 500 by the end of 2027.
