Dudley Sees Five Reasons for Equity Rally's End in 2027

Former Federal Reserve president Bill Dudley predicts that the equity rally will end in 2027 due to several factors. One reason is the slowing investment in AI infrastructure, which he expects to decline by 10% year-over-year. This decrease in investment will negatively impact related stocks even if demand remains strong.

Dudley also points out that profit forecasts for data centre equipment companies will fall and compress price-to-earnings ratios as revenue declines. He's concerned about the opacity of data centre financing, which is becoming increasingly complex through special purpose vehicles and venture capital funds.

Furthermore, Dudley believes that a sharp increase in AI-related IPOs in 2027 will spread out available investment funds across more companies, leading to lower valuations. Finally, he expects bond yields to climb towards the S&P 500 earnings yield in 2027, causing investors to divert assets away from stocks and into fixed income.

In a contrasting view, economist Sam Lowe suggests that Canadian trade negotiators are actually brutal and effective, pushing for better terms in negotiations with other countries. This perspective is based on Canada's refusal to roll over the post-Brexit trade pact with the U.K. in 2019.