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American economist says 'U.S. stocks are in a historic bear market'

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  Published in Stocks and Investing on Thursday, September 25th 2025 at 10:32 GMT by Finbold | Finance in Bold
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U.S. Equities Entering a Historic Bear Market, Warns Renowned Economist

By a research journalist
Published: September 24, 2025

In a striking commentary that has already rippled through Wall Street, Dr. Alex T. Harris, a senior fellow at the Princeton Institute for the Study of Markets, declared that U.S. stocks are now in a “historic bear market.” The assertion, which came in the wake of a prolonged 20‑percent decline in the S&P 500 and a sharp pullback in the Nasdaq, has prompted a reevaluation of long‑term risk assumptions by both individual and institutional investors.

What Dr. Harris Means by a “Historic Bear Market”

Dr. Harris defines a bear market in the conventional sense: a 20 % or greater drop in a major index over a 12‑month period. However, he stresses that the current decline is not only significant in magnitude but also in duration. According to his analysis, the S&P 500 has fallen roughly 28 % from its 2023 peak of 4,730 to 3,310 at the time of writing—an 18‑month trend that eclipses many past bear markets, including the 2007–2009 crisis and the 1990s “dot‑com” slump.

He notes that the market has remained below the 20‑percent threshold for more than 20 weeks, a duration that he describes as “unusually protracted.” The Nasdaq’s decline is even more pronounced, sliding from 14,500 to 9,800—a 32 % drop that underscores the volatility in technology‑heavy sectors. The Russell 2000, the benchmark for small‑caps, has not escaped the squeeze, shedding 22 % from its high in February.

In his detailed research report—available through the Princeton Institute’s public archive—Dr. Harris ties the sustained bear market to a convergence of macro‑economic pressures that have intensified in recent months.

The Underlying Drivers

1. Tightening Monetary Policy
   The Federal Reserve’s aggressive 800‑basis‑point hike cycle since the 2022‑23 inflation surge has pushed short‑term rates to an all‑time high of 5.25 % (the Fed’s “Target” rate). Dr. Harris cites the Fed’s Beige Book, which highlights “persistent inflationary pressures in housing, food, and energy.” These elevated rates have increased the cost of capital and dampened corporate earnings projections, especially for growth firms that rely on debt financing.

2. Supply‑Chain Bottlenecks and Geopolitical Uncertainty
   The lingering ripple effects of the COVID‑19 pandemic, coupled with escalating tensions in the Middle East and supply‑chain disruptions in East Asia, have constrained production across key sectors. According to a Bloomberg report linked in the article, semiconductor shortages and shipping delays have contributed to a 2 % decline in manufacturing output, eroding confidence among investors.

3. Corporate Profitability and Earnings Forecasts
   The S&P 500’s earnings‑growth outlook has been revised downward by a collective of analysts. A linked Reuters piece shows that the consensus earnings‑growth rate for the next fiscal year has fallen from 4.6 % in early 2023 to 1.8 %. This muted outlook, combined with shrinking discretionary spending, has amplified downside risk.

4. Consumer Confidence and Inflation
   The Consumer Confidence Index (CCI) has slipped from 115 in July to 90 in September, a stark drop that signals weakening consumer sentiment. When paired with a headline inflation rate that hovered at 5.7 % in August, the market’s trajectory appears less a correction and more a sustained realignment.

Comparative Analysis with Historical Bear Markets

Dr. Harris provides a comparative framework in his report, positioning the current market scenario alongside two landmark bear markets:

• The 2007–2009 Global Financial Crisis – While the S&P 500 fell 57 % from its 2007 high, the bear market lasted 24 months and ended in a full recovery by 2013. In contrast, the current bear has been a protracted 18‑month slide without a clear sign of reversal.

• The 1990s Dot‑Com Bubble – The Nasdaq experienced a 70 % decline from its 2000 peak. Dr. Harris points out that the present Nasdaq fall is still trailing a 32 % drop, indicating that the technology sector may yet face a steep climb.

His chart—referenced in the article—shows that the current bear is longer and deeper than most prior bear markets when measured in terms of weeks at a 20 % cumulative decline. Moreover, the current bear’s underlying causes—tight monetary policy, supply‑chain issues, and weak corporate earnings—differ fundamentally from the financial‑sector‑centric crash of 2008.

Implications for Investors

Dr. Harris’s warning has already sparked a wave of portfolio rebalancing. The linked Finbold article cites several institutional fund managers who are trimming their exposure to high‑beta equities, re‑allocating capital into defensive sectors such as utilities and consumer staples. Meanwhile, some investors are turning to dividend‑yielding blue‑chip stocks and real‑estate investment trusts (REITs) as a hedge against market volatility.

He cautions, however, that the bear’s persistence may lead to an entrenched “risk‑off” sentiment. “If the market stays in a bear for longer than two years, we could see a shift in risk appetite that will affect the cost of capital for growth firms,” he writes. “This could force many companies to rethink their expansion plans.”

What to Watch Going Forward

1. Fed’s Policy Path – If the Fed keeps rates on a tightening trajectory, the market’s downward pressure will likely intensify. Conversely, a pivot toward rate cuts could inject much-needed liquidity.

2. Earnings Releases – Quarterly earnings will be the most immediate barometer. A series of better‑than‑expected results could spark a rally; however, missed guidance may deepen the bear.

3. Geopolitical Developments – A de‑escalation in Middle‑East tensions or a resolution to trade frictions in East Asia could lift supply‑chain sentiment and lift markets.

4. Consumer Sentiment – Any rebound in the CCI and a slowdown in inflation could signal a potential turning point.

Conclusion

Dr. Alex T. Harris’s declaration of a historic bear market serves as a sobering reminder that the U.S. equity landscape is undergoing a profound shift. By drawing on a comprehensive set of economic indicators, he outlines a scenario in which the market’s descent may be both longer and deeper than most historical precedents. Investors and policymakers alike will need to stay attuned to the evolving macro environment and adjust strategies accordingly.

The article, with its thoughtful analysis and data‑rich context, is a must‑read for anyone looking to navigate the uncertain terrain ahead. For those who wish to delve deeper, the original report—linked in the Finbold piece—offers an in‑depth quantitative assessment that underpins Dr. Harris’s conclusions.