Panmure Liberum Forecasts S&P 500 Falling to 5,000, Warns Bull Run Nearing End: The 35% Warning That's Dividing Wall Street

Panmure Liberum Forecasts S&P 500 Falling to 5,000, Warns Bull Run Nearing End: The 35% Warning That's Dividing Wall Street

## The Note That Just Made Every Bull Do a Double-Take

Let me tell you something about Wall Street that most people learn the hard way.

**When everyone agrees, that's usually when you should worry.**

Right now, the S&P 500 is sitting at **7,722.72** — just about **1% below its all-time high** . The bull market that started in October 2022 is still running. The index is up **12.8% this year alone** . And the consensus on Wall Street? Optimism. Most brokerages expect the S&P 500 to finish 2026 at **8,000 or above** .

**But one analyst just went the other way. And he went hard.**

On Monday, October 5, 2026, **Joachim Klement** — a research analyst at U.K. investment bank **Panmure Liberum** — published a note with a forecast that made people sit up straight. Alongside colleague **Francisca Reis**, Klement predicted the **S&P 500 will fall to 5,000 by the end of 2027** .

**That's a drop of more than 35% from current levels.**

And the trigger? **An AI reality check that cracks the market's foundation.**

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## The Number That Should Make You Pause

### 5,000: From Record Highs to a 35% Crash

**Frequently Asked Question:** *How serious is this forecast?*

Let me put it in perspective.

**Current S&P 500:** ~7,722 

**Panmure Liberum's 2027 target:** **5,000** 

**The decline:** **Over 35%** 

**For context:** A 35% drop would be worse than the 2022 bear market (25%) and comparable to the 2020 COVID crash (34%) .

**Klement isn't mincing words about what he thinks is coming:** **"I think the entire bubble will pop either in 2027 or 2028"** .

**Frequently Asked Question:** *Why does he think the bubble will pop?*

Because of a **capital expenditure trap** that the market has built for itself.

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## The AI Capex Pickle: Why Good News and Bad News Both Hurt

### The Trap Explained

**Frequently Asked Question:** *What is the "capex pickle" Klement is talking about?*

This is the heart of his argument. And it's genuinely brilliant — and terrifying.

**Here's the setup:** AI hyperscalers — Microsoft, Google, Amazon, Meta, and others — are spending enormous amounts of money on AI infrastructure. **Goldman Sachs recently predicted hyperscaler capex could hit $1.2 trillion in 2027** .

**The trap:** The market can't handle either outcome.

**If hyperscalers KEEP SPENDING:** Investors get nervous. They don't want to see capex accelerate further. Any big jump in spending could **clobber the stocks that carry the greatest weight in the market** — the very companies driving the AI narrative .

**If hyperscalers CUT SPENDING:** That's also a problem. If capex falls short of expectations, it **badly damages sentiment toward the beneficiaries of that spending** — particularly **chipmakers and data-center equipment makers** .

**Klement's conclusion:** **"The market has got itself into a bit of a capex pickle"** .

**Frequently Asked Question:** *So there's no winning scenario?*

That's what Klement is arguing. The AI trade has become so dependent on continuous, accelerating spending that **any deviation — in either direction — could trigger a selloff**.

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## The Reality Check That's Coming

### The Q3 Earnings Test

**Frequently Asked Question:** *When does Klement think the reckoning arrives?*

**The upcoming Q3 earnings season.** And then **January 2027**, when companies release full-year guidance.

**"The upcoming Q3 earnings season and then the full-year earnings and guidance for 2027 in January will provide a critical reality check,"** Klement wrote .

**Why this matters:** The market has been supported by **strong earnings growth and resilient economic data** — particularly leading indicators like purchasing manager indexes . But that support can't last forever.

**Klement's view:** Investors are about to find out whether the AI-driven earnings boom is **sustainable — or just a bubble inflating**.

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## The Headwinds Nobody Wants to Talk About

### Inflation, Rates, and Bonds

**Frequently Asked Question:** *What else is pressuring the market?*

Klement laid out a list of headwinds that have been building for months — and that the market has somehow shrugged off .

**First: Inflation remains stubbornly high.**

**Second: Long-term bond yields have risen to "ever new heights."**

The **10-year Treasury yield** is hovering near levels not seen since **2002** .

**Third: Central banks have started hiking rates again.**

Last month, major central banks — including the **Federal Reserve**, the **European Central Bank**, and others — raised rates to fight inflation .

**Frequently Asked Question:** *What does Klement say about rate hikes going forward?*

He believes **further rate hikes by the Fed and the Bank of England** are coming before year-end.

**"Add to that additional rate hikes by the Fed and Bank of England until the year-end, and the bull market in equities could come to an abrupt end sooner than many investors expect"** .

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## The Contrarian Call: Standing Alone Against the Street

### What Everyone Else Is Saying

**Frequently Asked Question:** *Is Panmure Liberum the only bearish voice?*

**Not entirely — but they're definitely in the minority.**

**The contrast:**

- **Panmure Liberum:** S&P 500 falls to **5,000** by end of 2027 

- **Most brokerages:** S&P 500 ends 2026 at **8,000 or above**, bull market extends into next year 

**The British brokerage also expects:**

- **Europe's STOXX 600** to fall to **430 points** by end of 2027 

- **UK's FTSE 100** to fall to **8,260 points** 

Both are **markedly below current levels**.

**Frequently Asked Question:** *Why is this call so contrarian?*

Because the market has been **remarkably resilient** despite a wall of worries. Klement acknowledged this himself: **"Stock markets have been remarkably resilient despite more and more obstacles put in their way"** .

**The obstacles:**

- Rising inflation that remains stubbornly high

- Long-term bond yields hitting new highs

- Central banks hiking rates

- Cooling optimism around AI 

**And yet the market kept climbing.** That resilience is exactly what makes the bearish case so difficult to argue — and so important to hear.

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## Where to Hide If He's Right

### The Defensive Playbook

**Frequently Asked Question:** *If the market crashes, where should investors put their money?*

Klement isn't just making a bearish call. He's also telling you where to hide.

**His recommendations for a drawdown** :

**Traditional defensive sectors:**

- **Food producers and sellers** — people eat regardless of market conditions

- **Pharmaceuticals** — healthcare demand is inelastic

- **Tobacco** — historically defensive, with high dividend yields

**Utilities — but with a caveat:**

- **Avoid utilities boosted by AI energy demand** — they're tied to the bubble

- **Favor U.K. and German infrastructure plays** instead 

**Bonds — but wait:**

- Klement expects bonds to get a bid **later in 2027**, when the stock market slide **encourages a move into havens** 

**The ultimate defensive position:**

**"Cash and fetal."**

That's not a typo. It's Klement's shorthand for **hunkering down and protecting capital** .

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## Frequently Asked Questions

**Q: What exactly did Panmure Liberum forecast?**

A: The S&P 500 will fall to **5,000 by the end of 2027** — a drop of more than **35%** from its last close of 7,722.72 .

**Q: Who made this forecast?**

A: **Joachim Klement** and **Francisca Reis** of Panmure Liberum, a U.K. investment bank .

**Q: Why does Klement think the market will crash?**

A: An **AI reality check** — specifically, a capex trap where both increased and decreased hyperscaler spending hurt the market. He also points to **further rate hikes** from the Fed and Bank of England .

**Q: What is the "capex pickle"?**

A: Investors don't want hyperscalers to increase spending (it hurts big tech stocks), but they also don't want spending to fall short (it hurts chipmakers and data-center equipment makers). Either outcome damages sentiment .

**Q: When does Klement expect the bubble to pop?**

A: **2027 or 2028**. He sees the **Q3 earnings season** and **January 2027 guidance** as critical reality checks .

**Q: Is anyone else bearish?**

A: Most brokerages are bullish, expecting the S&P 500 to end 2026 at **8,000 or above**. Panmure Liberum's call is an outlier .

**Q: What should investors buy if Klement is right?**

A: **Defensive plays**: food producers, pharmaceuticals, tobacco, and non-AI utilities. Plus **cash**. Bonds may get a bid later in 2027 .

**Q: What are the main headwinds Klement cites?**

A: **Stubborn inflation, rising bond yields, higher interest rates, and cooling AI optimism** .

**Q: How does this compare to other forecasts?**

A: It's one of the **most bearish calls on Wall Street**. Most analysts expect the bull market to continue .

**Q: What's the bottom line?**

A: **The bull market may be closer to the end than most investors think** — if bond yields and rates keep climbing. The upcoming earnings season is the first major test .

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## Conclusion: The Loneliest Call on Wall Street

Let me bring this home.

**Joachim Klement just made a call that most of Wall Street thinks is wrong.**

**5,000 on the S&P 500 by end of 2027.** A **35% crash**. An **AI bubble that pops in 2027 or 2028**.

**He might be wrong.** The market has defied bearish calls for years. Every correction has been bought. Every dip has been a buying opportunity. The bulls have been right.

**But here's why his call matters:**

**It's not a prediction based on pessimism.** It's a prediction based on **structural logic**. The AI trade depends on a capex cycle that can't keep accelerating forever. When it slows — or when it accelerates too fast — the market faces a reckoning.

**Klement's advice isn't to panic. It's to prepare.**

**Defensive sectors.** **Cash.** **Patience.** And a willingness to look at the market's most crowded trade and ask: **What if the crowd is wrong?**

**The upcoming Q3 earnings season starts in weeks.** Watch the hyperscaler capex numbers. Watch the guidance for 2027. Watch the bond yields.

**The bull market isn't over yet. But Klement just told you where the exits are.**

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## Disclaimer

**This article is for informational purposes only and does not constitute financial, investment, or trading advice.**

I am not a licensed financial advisor, investment professional, or analyst. The views expressed here are based on publicly available information and my own analysis at the time of writing.

**Key facts cited in this article are sourced from Panmure Liberum research, Reuters, MarketWatch, and other outlets as of October 5, 2026.** The forecasts described are opinions, not guarantees. Joachim Klement's 5,000 target represents one analyst's view and stands in stark contrast to the consensus. **Past performance does not guarantee future results.**

**Investing in stocks involves significant risk, including the potential loss of your entire investment.** The S&P 500 could fall 35% — or it could rise. No one knows. **The bearish case outlined in this article may not materialize.** Conversely, the bullish consensus may be wrong. Always consider multiple perspectives.

**The mention of specific sectors, strategies, or forecasts is for illustrative purposes only and is not an endorsement or recommendation.** Do not make financial decisions based solely on this article or any single analyst's opinion.

**Always conduct your own research before making any investment decisions.** Consult a qualified financial professional who understands your personal situation, risk tolerance, and goals.