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The S&P 500 gained an impressive 24% in 2024, marking back-to-back 20%-plus returns, but it's been more of a roller-coaster in 2025.
The benchmark index retreated 10% from recent highs last month, putting it in correction territory and raising red flags among investors accustomed to gains.
Stocks' sell-off surprised many investors, but Wall Street hedge fund manager Doug Kass wasn't caught flat-footed.
Kass predicted a stock market reckoning in December and continued to beat the bearish drum on the S&P throughout February.
That wasn't his only prescient prediction this year, though. As stocks were mired in a fast and steep sell-off in March, he switched gears, saying stocks were oversold and ready to head higher.
Kass's correct forecast is rooted in his having experienced more than his share of good and bad markets firsthand during his 50-year career, including his time as research director for Leon Cooperman's Omega Advisors.
He successfully navigated the inflation battle in the 1970s and early 1980s, the savings and loan crisis in the 1980s and early 1990s, the Internet boom and bust, the Great Recession, Covid-drop, and 2022's bear market.
In short, Kass knows a lot about stock market cycles, which makes his latest take on the market worth considering.
The stock market gets rattled by recession worries
There's good reason for stocks to have struggled this year.
Recession risks mounted last month following middling economic data showing sticky inflation to a weaker jobs market. Worrying over a tariff war following President Trump's decision to enact 25% tariffs on Canada and Mexico and 20% tariffs on China did little to assuage investors' concerns.
Related: Jamie Dimon sends curt 6-word response to tariff war
It's certainly welcome news that inflation has retreated to below 3% since peaking above 8% in the summer of 2022. The dip in inflation allowed the Federal Reserve to take its foot off the economic brake pedal last fall, resulting in a dovish monetary policy that included cuts to the Fed Funds Rate in September, November, and December.
However, the relief on rates has proven short-lived. A recent increase in the Consumer Price Index inflation to 2.8% from 2.4% in September has since caused Fed Chairman Jerome Powell to pause additional rate cuts, disappointing businesses and borrowers.
There have also been concerning job data. Layoffs have become more common, and the unemployment rate has inched up to 4.1% from 3.5% as recently as 2023. American employers cut 172,017 jobs in February, the most for the month since 2009.