Wall Street Renowned Bearish on 2026 Market Outlook, Anticipates Fed to Accelerate Rate Cuts

On December 16, BCA Research—a market research firm led by veteran Wall Street bear Peter Berezin—released a report titled *Return of Nasdog*, taking a cautious view on the U.S. market outlook. The firm’s core take: The AI boom will fizzle out, and U.S. economic activity will slow sharply. BCA noted overinvestment in AI should have emerged sooner: By 2025, U.S. tech and software sector investment as a share of GDP will hit 4.4%—nearing dot-com bubble-era levels. With AI assets typically depreciating at ~20% annually, tech giants face $400 billion in yearly depreciation costs—an amount exceeding their total 2025 profits. The S&P 500’s forward P/E ratio is expected to reach 22.6x in early 2026, well above its historical median of 18x. The already fragile stock market will struggle to hold up as the AI hype narrative unravels. BCA predicts: “Nearly all U.S. stock market sectors will crater in the second half of 2026.” This will push the Federal Reserve to speed up rate cuts in H2 2026. By end-2026, the federal funds rate will fall to 2.25%, and the 10-year U.S. Treasury yield will drop to 3.1%.