Felix Zulauf’s 2025 Market Outlook: Navigating Volatility for a 2026-2027 Bull Run

Felix Zulauf: Build Dry Powder Until Fall & Then Get Long For A 2-Year Rally In Stocks (YouTube link)

Felix Zulauf, a prescient market forecaster, shared his outlook on the current market environment, emphasizing a transitional 2025 with opportunities for investors who stay disciplined. Here are the key points:

• Market Bottoming and Strategy:
• Recent market corrections (S&P to 4835, NASDAQ slightly below 17,000) align with Zulauf’s earlier predictions of a 15-20% drop in 2025.
• He views this as "classic bottoming action," driven by fear and panic. Investors should avoid selling during sharp declines and instead "keep powder dry" to buy during selloffs.
• Zulauf advises doing the opposite of emotional impulses: buy when markets look weak and avoid chasing bounces.
• 2025 Outlook:
• 2025 is a transitional year with volatility and potential retests of lows (possibly S&P 4500) by May or fall.
• A global recession is likely (>50% chance) in the second half of 2025, which could lead to another market dip.
• By fall 2025, investors should be fully invested for a potential rally into 2026-2027, targeting S&P 7500.
• Global Economic Shifts:
• Ongoing geopolitical and economic rearrangements (trade, capital flows) are creating a "roller coaster" environment.
• U.S. trade deficits, driven by overconsumption and underproduction, are unsustainable. Trump’s tariffs aim to address this but have caused global mistrust and disrupted trade confidence.
• Capital repatriation is weakening the U.S. dollar, with a multi-year decline expected (possibly to 97-98 short-term).
• Investment Recommendations:
• Equities: Favor non-U.S. markets (Europe, Asia, including China) over U.S. due to overvaluation and the end of U.S. exceptionalism. Focus on industrial companies with strong U.S. market positions and avoid low-tax platform companies (e.g., Apple).
• Bonds: Bearish long-term due to inflationary pressures. Treasury yields may dip to ~3.5% in a recession but won’t fall significantly. Expect 10-year yields to break 5% by 2026-2027.
• Commodities: Bullish on oil (target $150-200 by 2027) and gold (near-term peak at $3300-3400, then correction to ~$2600 before resuming uptrend). Gold’s rise is driven by geopolitical shifts, not just inflation.
• Cash: Hold cash to deploy opportunistically during selloffs.
• Key Risks and Opportunities:
• A recession could delay the rally, but central planners (e.g., fiscal stimulus in the U.S., Europe, and China) are already stepping in to support economies.  
• Extreme pessimism (e.g., Bank of America’s bearish fund manager survey) signals a medium-term bottom, offering buying opportunities.
• The U.S. dollar’s role as a reserve currency is weakening, impacting capital flows and supporting gold.
• Actionable Advice:
• Be opportunistic on dips between now and fall 2025. By fall, especially if S&P nears 4500, deploy capital into favored stocks/sectors.
• Focus on themes (e.g., industrial, international markets) rather than individual stock picking unless supported by deep research.
• Stay disciplined, avoid panic, and prepare for a rewarding 2026-2027 bull market.

Zulauf’s core message: 2025’s volatility is a setup for a strong rally in 2026-2027. Investors should stay calm, buy strategically during selloffs, and position for long-term gains in equities (especially non-U.S.), gold, and oil.