The United States might be posting some promising growth data amid government shutdowns and debt ceiling debates, but Albert Edwards, Societe Generale's uber-bearish strategist, has predicted a recession is coming for the world's biggest economy.
"No-one expects a recession is around the corner, but in my experience, they never ever do," Edwards said in his latest note released late on Wednesday.
"The doomsayers who predicted that this recovery was on the verge of faltering have been proved wrong, and like the boy who cried wolf, can be safely ignored by the market. Yet that is exactly what happened in 2006 with the U.S. consumer and housing boom, where the voices of caution had been so wrong, for so long."
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Edwards believes his "Ice Age" thesis - a series of economic cycles that deteriorate in ever decreasing circles - is nearing its final stages. With stocks and bond yields showing an inverse correlation, this recession would lead to an equity de-rating to even lower lows, he said.
The "key precursor" to this recession is slowing productivity growth in the U.S., he said. Non-farm business productivity growth in the third quarter was flat compared to the year before, the Labor Department said in mid-November. For many analysts this was a sign that the U.S. Federal Reserve would maintain its $85 billion-a-month bond buying program.
But delving deeper into the figures, Edwards has noticed a worrying trend in a cycle that began in June 2009. Unit labor costs are now running well ahead of output price inflation, he said, meaning a margin and profits downturn for U.S. businesses is now about to unfold. That leaves the economy extremely vulnerable to a downturn in the investment cycle.
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"U.S. profits are now beginning to struggle. Once the profits cycle turns downwards, it tends not to recover. The die is cast," he said. "A full-blown profits and investment downturn is most likely to be triggered by Asian and EM (emerging market) devaluations releasing surplus capacity onto the West and crushing pricing power even further."
Recent market phenomena have also skewed investors' perspectives of what is considered fair value for equities, he added. The current forward price-to-earnings ratio - a market measure used to give a valuation of stocks - for the S&P 500 can only be considered "fair value" in the shadow of the Nasdaq bubble, he said.
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"In many investors' minds a recession will not occur unless the Fed triggers one with monetary tightening. That is of course nonsense. A credit bubble can burst without any monetary tightening and similarly the profit cycle can turn down due to a variety of factors," he said.
"A cycle that is 55 months old is already displaying signs of facial wrinkles that the Fed cannot prevent, however much moisturizing QE (quantitative easing) is applied."
It's not the first time that Edwards has made bearish predictions on stocks. In July last year, Edwards said the U.S. had already entered a recession and it won't be long before the equity market reacts. In July 2012, he warned about the "ultimate" death cross for the S&P 500 - where the 50-month moving average falls below the 200-month moving average. Since that call the S&P 500 has risen 32 percent.
Meanwhile, other banks have also released bearish outlooks on stocks for next year. In early November, Nomura strategist Bob Janjuah said in a client note that he expects a 25-50 percent sell-off over the last three quarters of 2014 in global stock markets. Steen Jakobsen, chief economist at Saxo Bank has explained on several occasions to CNBC in recent weeks that bullish investors are "chasing the tail" of the recent equity rally, indicating that now is not the time to be risky.
(Read More: Stand by...a hefty drop's on the way: Nomura's Janjuah )
Bill Blain, a senior fixed income broker at Mint Partners is another expert who believes 2014 could bring gloom to certain asset markets. He told CNBC Thursday that he expects "very negative bond market reactions" as the Fed looks to "taper" its asset purchasing program and predicts a "massive sell-off" in the U.S. once it starts.
By CNBC.com's Matt Clinch. Follow him on Twitter @mattclinch81
image: © Tambako the Jaguar