Economists warn three major "bull market drivers" are weakening, is the frenzy of the US stock market coming to an end?

American economist David Rosenberg warned clients in a report on Wednesday that the main factors that have driven a significant increase in the US stock market over the past 30 years are nearing extremes. This indicates that future returns will decrease significantly, and one should prepare for limited upward movement in the US stock market in the near future. Rosenberg specifically highlighted recent trends in valuation, interest rates, and taxes. According to Rosenberg, these factors have reached their limits, which could create downward pressure on company profits, thereby affecting stock prices. Rosenberg said, "There is little fuel left in the stock market." Stock Valuation Rosenberg pointed out that the forward price-to-earnings ratio of the S&P 500 index is 22.3 times, significantly higher than its historical average by more than one standard deviation, reaching the highest level since the peak of the pandemic tech stock rally in 2021. With such high valuations, coupled with extremely bullish sentiment surpassing levels seen before the financial crisis, Rosenberg believes there is little room left for valuation to increase further, "there is no further room for multiple expansion." Higher stock market valuations largely depend on continued growth in corporate profits, but Rosenberg suggested that this is unlikely. Tax Rates For decades, the US corporate tax rate has been decreasing, which has boosted corporate profits and helped raise stock prices. While Trump's trade depended on potential legislation to lower the corporate tax rate from 21% to 15%, Rosenberg believes this is unlikely. Given the current effective corporate tax rate of 17%, even with the Republicans controlling the White House and Congress, there is hardly any room for further decline, according to Rosenberg. Interest Rates Historically, declining interest rates have helped drive the US stock market upward, but this trend may be coming to an end. Although the Federal Reserve is cutting interest rates, rates are already at historical lows, indicating there is not much room for further decline, especially if President Trump's agenda could potentially raise inflation. Rosenberg said, "While rates are higher than the historical lows of 2021, they are still at the lower end of the historical range. Currently, the 10-year US Treasury bond yield is 4.3%, less than half of the average of 10.6% in the 1980s." In conclusion, Rosenberg stated that unless operating profits increase significantly after deducting the impact of taxes and interest expenses, it is unlikely for the US stock market to experience significant growth in the future. Rosenberg added, "Consumers are increasingly focused on costs, and net profit margins are at historical highs, so increasing profit margins seems like a daunting task. The three levers of price return are approaching their limits."