There will likely be problems in the future According to BCA Research, the U.S. stock market.
Peter Berezin, chief global strategist at BCA Research, warned in a client note last week that contrary to popular belief, the economy will fall into recession either this year or early 2025.
If that happens, the S&P 500 could fall to 3,750, which would be a 30% drop from current levels.
Berezin’s forecast is based on a view that the labor market will slow significantly in the coming months, putting a heavy strain on consumer spending, the main driver of economic growth. The relationship between inflation and unemployment is measured by something called the Phillips curve.
“The U.S. avoids a recession in 2022 and 2023 because the economy is operating on the steeper end of the Phillips curve,” he writes. “With the labor supply curve nearly vertical, weakening labor demand primarily translates into slower wage growth and fewer job openings — in other words, outright deinflation.”
Berezin also predicts that growth in Europe and China will slow sharply, causing widespread economic pain, a scenario that could further weaken global growth and significantly weigh on international stock prices.
Stock prices hit new records in mid-May, with the Dow Jones Industrial Average topping 40,000 for the first time in history, but have since fallen from those highs.
Stock indexes opened lower on Monday morning as investors awaited a key jobs report from the Labor Department. The S&P 500 was down about 12 points as of mid-morning.
BCA Research’s forecast, one of the most pessimistic on Wall Street, comes after a volatile year for markets.
The three indexes will decline in mid-2023, Federal Reserve The Fed will raise interest rates further than previously expected and will keep them at their peak levels for an extended period of time. But the Fed has recouped those losses and more, with the S&P 500 up more than 29% since its trough in late October.
That index has risen about 15% since the beginning of the year, while the Dow Jones Industrial Average has risen 3.7%, while the tech-heavy Nasdaq Composite Index is up about 20% so far this year.
