An investment expert has warned that a deeper stock market correction could emerge in 2027 as economic growth slows and inflation eases following a period of elevated expansion.
Chance Finucane, Chief Investment Officer at Oxbow Advisors, said current market conditions still support risk assets in the near term.
However, he expects a more challenging backdrop next year when investors begin comparing economic data against the strong growth and inflation figures recorded in the first half of this year, Finucane said in an interview with David Lin published on July 16.
The outlook adds to growing debate over the sustainability of the rally in artificial intelligence-linked stocks, which have driven much of the market’s gains in recent years.
According to Finucane, a deeper decline may develop in 2027 as growth rates appear to decelerate and inflation trends continue to cool.
He noted that AI-related stocks could continue advancing through year-end, supported by strong investor enthusiasm. However, the risk of a correction may rise as investors begin pricing in slower year-over-year economic growth.
“For the remainder of this year, maybe there is a deeper correction that has started in these AI names that could go further. It would not surprise us if the enthusiasm and greed around this trend continues and they move higher later into the year, but we are looking ahead to 2027. We do think that there’s a potential for a deeper decline next year mainly because you’re going to be cycling through some,” he said.
Impact on risk assets
The strategist said a combination of moderating growth and declining inflation is typically less favorable for higher-risk assets, raising the possibility of a broader market decline prediction becoming reality next year.
Alongside its market correction forecast, Oxbow Advisors continues to favor short-term fixed-income investments over long-dated bonds.
Finucane said the firm remains focused on Treasury securities, investment-grade corporate bonds, and municipal bonds with maturities of about three years or less.
The strategy is designed to allow investors to reinvest at potentially higher yields if inflation and interest rates move higher.
The firm also increased exposure to two-year Treasuries after yields climbed above 4%, locking in those rates for clients.
According to Finucane, long-term bonds could remain unattractive for extended periods if the current interest-rate cycle persists, making shorter-duration holdings a more flexible option for investors navigating uncertain market conditions.
While he expects volatility to continue through the remainder of the year, Finucane indicated that the greater risk for equities may emerge in 2027, when slowing growth and lower inflation could trigger a deeper stock market correction.
