With institutions and retail investors aggressively adding leverage, combined with anxiety over the returns from tech giants' massive spending on AI infrastructure, a macro strategist has issued a stern warning: US stocks could shift from bull to bear within six to twelve months. The US stock bull market, which has lasted about four years, may be approaching its final stage. As institutional and retail position concentration continues to rise and margin leverage keeps accumulating, a macro strategist who has long tracked market cycles warns that US equities could complete a bull-to-bear transition within the next six to twelve months.
Alex Barrow, founder and chief market strategist at macro research firm Macro Ops, believes market risks are gradually building, but the bull market has not yet fully ended. Stocks could still rise in the period ahead, though investors should brace for more violent price swings. Barrow points out that hedge funds and retail investors have maintained elevated equity risk exposure for an extended period, while borrowing to invest has also continued to expand. Once the market trend reverses, concentrated unwinding of highly leveraged positions could amplify the decline and push US stocks into a classic cyclical bear market.
Crowded Positioning and Accumulated Leverage — Late-Cycle Risks Emerge
Barrow argues that the most alarming phenomenon in the current US stock market is the steadily climbing overall risk exposure across all types of investors. As share prices rise, investors keep enlarging their equity holdings and using margin to increase investment scale. This trend may reinforce market momentum during the upswing, but when risk appetite reverses, it can also create concentrated deleveraging pressure. The market corrections in July and October of this year have already exposed some of these problems. The July sell-off dealt a heavy blow to hedge fund Situational Awareness, while US stocks saw another notable decline in October. Barrow notes that, according to broker data, hedge funds have recently begun adopting more cautious strategies, hedging long exposure by adding short positions, gradually bringing their overall portfolios closer to market-neutral. He believes the severe volatility this summer may mark the beginning of the end for this bull market cycle. However, market tops are usually not determined by a single event but require a prolonged formation process. Based on Barrow's assessment, a typical market topping process could last eight to nine months, so there is still some upside room for now, but accompanying volatility and corrections may also increase markedly.
Recent market performance echoes this concern. The Nasdaq fell nearly 7% in October, its worst monthly performance since the tariff shock in April 2025. As tech stocks declined, the market began reassessing the long-term returns on artificial intelligence investments.
AI Financing Pressure Intensifies — Monetary Tightening Could Be the Turning Point
The AI investment boom is another key basis for Barrow's outlook on this bull market. Macro Ops had flagged the artificial intelligence and memory chip sectors relatively early and built substantial investment exposure in related areas. But Barrow says that as the rally in related stocks accelerated and trading became overly crowded between February and March of this year, his team began to cash in most of its profits. Currently, he is more concerned about the enormous capital expenditure required for AI infrastructure buildout and the growing reliance of companies on debt market financing. Barrow expects that, with the combined effect of AI investment and the US fiscal deficit, inflation could remain persistently high, and the Federal Reserve may ultimately need to adopt monetary tightening measures more aggressive than the market anticipates. As financing costs rise, companies may find it harder to access capital. He believes that even if AI infrastructure construction does not come to a complete halt, as long as investment growth enters a plateau, it could deliver a significant blow to the economy and financial markets.
Recent earnings reports have already drawn investor attention to this issue. Tech companies including Meta Platforms, Inc. (META), Alphabet (GOOGL) and Amazon.com (AMZN) continue to raise their AI capital expenditure plans, but market concerns over the return cycle on investment and cash flow pressure are growing. Barrow believes that when financing conditions continue to tighten and AI investment growth slows, the growth momentum the market previously derived from capital expenditure expansion may weaken accordingly. Goldman Sachs also expects in its latest market analysis that AI investment spending will continue to grow, but its growth rate may be approaching a peak.
Shifting to Short-Term Strategy — Retaining Some AI Investment Exposure
Despite turning cautious on the medium-term market outlook, Barrow has not fully exited the stock market. He says Macro Ops is now placing greater emphasis on short-term, tactical investment arrangements and continues to monitor sectors with structural growth opportunities. Memory chips are one area he remains bullish on. Barrow expects related stocks could once again become market leaders, and his team has recently begun rebuilding some memory chip positions, with watch targets including Micron Technology, related South Korean companies and memory chip thematic funds. He also notes that the forward price-to-earnings ratio of South Korea's KOSPI index is near historic lows. While cyclical industries typically appear undervalued at peak earnings, he believes structural demand driven by artificial intelligence could extend this semiconductor cycle.
In other sectors, Barrow is watching building materials companies whose valuations have declined due to stock price corrections, as well as natural gas producers benefiting from data center energy demand. He believes insufficient power grid infrastructure is constraining data center construction, with some projects needing to rely on additional natural gas supply to meet electricity demand. This leaves investment opportunities in related energy and construction areas. AI-related healthcare and biotechnology companies are also on his radar. For precious metals and mining stocks, Barrow maintains long-term interest but believes related shares may still be in the process of finding a periodic bottom. At the same time, he warns that the S&P 500 index is highly dependent on a handful of large tech companies, with some companies' price-to-sales ratios exceeding 10 times, and market valuation concentration deserves vigilance. Barrow says his current strategy includes raising cash levels, diversifying equity holdings, and watching quality companies that have been significantly sold off this year, such as Berkshire Hathaway. He also retains some AI-related investment exposure to capture potential further gains in the later stages of the bull market.
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