A British Brokerage Just Called a 35% S&P 500 Crash, and the Bond Market Is Already Agreeing

Here is something you do not hear on Wall Street every day: a real brokerage, with real clients and a real reputation, just told the world that the S&P 500 is going to lose more than a third of its value by the end of next year. Not in a crisis. Not in a recession forecast. Just a straight-up call that the bull market is running out of road.

Panmure Liberum said on Monday that the benchmark index will fall to 5,000 points by the end of 2027, a drop of more than 35% from Friday’s close of 7,722.72. The firm’s research analyst, Joachim Klement, put it bluntly: if bond yields and interest rates keep climbing, “the end of the equity bull market may be closer than many investors think.”

That is the kind of sentence that makes portfolio managers spill their coffee. The S&P 500 has been riding a bull run since October 2022 and is still up 12.8% this year. Most other brokerages expect the index to finish 2026 at 8,000 or above, with the rally stretching into next year. Panmure just walked into that consensus and kicked over the table.

And here is the uncomfortable part: the bond market might be on Panmure’s side.

Stocks and Bonds Are Living in “Two Fundamentally Different Worlds”

That phrase comes from Deutsche Bank macro strategist Henry Allen, and it perfectly captures Monday’s strange mood. Bond yields have climbed to historic highs on the back of stubborn inflation, fiscal worries, and monetary policy risk. The 10-year Treasury yield touched a fresh 24-year high of nearly 5.35% last Thursday and was still hovering around 5.3% on Monday. Meanwhile, stocks are sitting within a hair of record highs. The Nasdaq and the S&P 500 ended last week less than 1% from their peaks.

One of those two markets is wrong. That is basically Allen’s point. And his warning comes with receipts: the last three times financial stress like this persisted, in the 2011 sovereign debt crisis, the pandemic shock of early 2020, and the rapid rate hikes of 2022, risk assets eventually fell hard. “When this kind of financial stress has persisted,” he wrote, “risk assets can’t shrug that off indefinitely. In all those cases, there were ultimately significant equity declines.”

His conclusion: unless the stress in the bond market fades quickly, the downward pressure on stocks just keeps building.

What Monday Actually Looked Like on the Trading Floor

Monday’s session was the definition of nervous. The Dow Jones Industrial Average dropped around 263 points, or 0.5%, with Nike and Merck dragging it down. The S&P 500 barely held its ground, up a tenth of a percent. The Nasdaq did best, gaining 0.6% on the back of Nvidia, which pushed to yet another all-time high and a fresh buy point.

But look under the hood and the anxiety is obvious. Chip stocks lagged badly, with Intel tumbling more than 4% in premarket trading and the semiconductor ETF falling nearly 2%. Software names shone, with the software and services ETF up around 1%. When money rotates out of chips and into software on a Monday morning, traders are hedging, not celebrating.

The deal of the day was a monster: France’s Schneider Electric agreed to buy US software firm PTC in an all-cash deal valuing its equity at about $22.6 billion. PTC shares rocketed 37% before the bell. Big cash buyouts like that tend to happen when buyers think assets are fairly priced, but they also drain liquidity from the market, which is the last thing nervous traders want to see.

Elsewhere, the signals were mixed. Bitcoin climbed about 1% to roughly $86,300, close to a nine-month high, after weaker jobs data cooled rate-hike fears. Gold futures sat near $4,180 an ounce. Brent crude hovered around the psychologically loaded $100-a-barrel level, while WTI slid to about $89.60.

Why the Next Two Months Could Decide Everything

Panmure’s call is not just about yields. Klement admitted that strong earnings growth and resilient economic data are still propping up equities. The real test, he said, comes now: third-quarter earnings season kicks off in earnest this month, and companies will lay out their 2027 outlooks early next year. That is when we find out whether the strength is real or borrowed.

This week gives us the warm-up acts: Levi Strauss, PepsiCo, and Delta Air Lines all report before the big banks open the floodgates. After that, it is the magnificent seven and the rest of corporate America, all reporting into a market where the 10-year yield is above 5.3% and every valuation model is screaming that stocks are expensive.

Then there is the Federal Reserve. Friday’s jobs report, just 29,000 new jobs in September against expectations of 84,000, with unemployment ticking up to 4.2%, took an October rate hike off the table. Traders now see an 80 to 82% chance the Fed holds steady at its October 27 to 28 meeting. But a December hike is still largely priced in, and last month the Fed and the European Central Bank both raised rates to fight inflation fed by rising energy costs. Panmure warns that further hikes could hasten the end of the bull run.

Here is the list of things that have to go right for the bulls from here:

• Bond yields need to stop climbing, or at least stabilize, before they choke off valuations.
• Earnings season needs to deliver genuine growth, not just cost-cutting and buybacks.
• Oil needs to stay below $100 long enough for inflation fears to cool.
• The Fed needs to hold in October and sound dovish about December.

If even two of those break the wrong way, Panmure’s 5,000 target starts looking less like a provocation and more like a preview.

What This Means for Your Money

Let me be honest: single brokerage forecasts are entertainment as much as analysis. Panmure could be spectacularly wrong, and plenty of smart people think the AI boom and resilient earnings justify today’s prices. Nobody has a crystal ball, and anyone who tells you otherwise is selling something.

But the tension Allen described is real and measurable. You do not need to believe in a 35% crash to take the signal seriously. When the 10-year yield is at a 24-year high and stocks are at record highs at the same time, something has to give. It always has before.

For regular investors, the playbook has not changed: know your time horizon, do not panic-sell on headlines, and be honest about how much risk you are actually comfortable with. If a 35% drawdown in the S&P 500 would wreck your sleep or your retirement plan, that is information worth acting on while markets are calm, not after the storm hits.

The bulls might be right. The bears might finally get their moment. Either way, the next few weeks of earnings and Fed decisions are going to tell us which world Wall Street actually lives in.

Sources: Reuters, Barron’s, Investopedia. Related reading on VIDX: Wall Street’s Weird Friday: Terrible Jobs Report Sends Nasdaq Soaring and Bitcoin’s $87K Tease Just Cost Traders $570 Million in Hours. See also our Markets archive.