Move over, J.P. Morgan — we have a new contender for most apocalyptic stock-market forecast.
It comes courtesy of Peter Berezin, chief global strategist at BCA Research, who said in a report shared with MarketWatch on Thursday that he has revised down his target for the S&P 500 SPX to 3,750 — lower than J.P. Morgan Global Research’s year-end target of 4,200, the previous Wall Street low — due to expectations that the U.S. will soon enter a sudden and unexpected recession. Berezin expects that recession to begin either later this year or in early 2025.
Should that transpire, the S&P 500 could decline more than 30% from Friday’s levels as a result, according to his forecast.
Potentially making matters worse for markets, Berezin expects the economic pain will be widespread. He expects growth in Europe — which is only just starting to pick up — to slow. And China, which is still struggling in the aftermath of the collapse of a real-estate bubble, could also succumb.
The upshot is that, in this scenario, global growth would weaken at large, weighing on global stocks.
As far as the U.S. is concerned, Berezin’s thesis is rooted in the notion that a slowdown in the labor market is poised to accelerate rapidly — heaping enormous pressure on consumer spending, a key economic driver.
He rattled off a number of indicators suggesting that the torrid pace of pandemic-era hiring has given way to something far less appealing to workers. As official job-openings data show, the number of open positions have fallen substantially, as has the quit rate. And private surveys of job openings reflect an even more dramatic decline.
At the same time, Labor Department data show that the pace of wage growth has slowed.
There have also been signs that consumer spending has been slowing in recently released economic data, including Friday’s personal-consumption expenditures price index for May.
But Berezin believes this could be only the beginning, as a suddenly enfeebled labor market may kick off a vicious cycle.
Data on bank balances already show that lower-income Americans appear to have depleted their pandemic-era savings. As delinquency rates for credit cards and auto loans — already at levels unseen since 2010 — continue to climb, banks could opt to raise their lending standards, adding to pressures facing the consumer.
As the consumer slows, Berezin expects businesses could slow their spending on capital projects.
Indeed, data collected by BCA that tracks businesses’ spending plans show that many are already preparing to cut back on capital expenditures, or “capex,” despite the artificial-intelligence boom, the CHIPS Act and ongoing reshoring trends that Wall Street believes should boost this type of spending.
Once the recession envisioned by Berezin arrives, the Federal Reserve likely won’t swoop in to stop it — at least not right away. Fear of reigniting a second wave of inflation likely means Fed Chair Jerome Powell and his colleagues would be reluctant to act until it is already too late.
And fiscal policy likely won’t be much help, either. The budget deficit is already projected to grow to 7% of GDP in 2024, according to official Congressional Budget Office estimates. Right now, the U.S. is in dire need of fiscal discipline, not an increase in deficit spending.
As a result, regardless of who wins in November, the bond market would likely rebel against any attempts to increase unfunded spending.
BCA recommended that clients reduce their equity holdings while boosting their allocations to bonds and cash earlier this week.
But for those more inclined toward tactical trades, Berezin recommended a few, including shorting the price of bitcoin BTCUSD, -1.89% and betting that falling bond yields will drag the U.S. dollar DXY lower against the Japanese yen USDJPY, 0.03%. Berezin expects that the yield on the 10-year Treasury note BX:TMUBMUSD10Y could fall to 3% if his recession scenario pans out, while the fed-funds target rate could be cut to 2%.
By comparison, the 10-year was at 4.34% as of Friday, while the fed-funds target rate remains in a range of 5.25% and 5.5%.
For its part, J.P Morgan’s top strategist, Marko Kolanovic, reaffirmed his target for the S&P 500, which is calling for the index to drop more than 23% from current levels by year’s end.
According to JPM’s midyear outlook, released this week, the investment bank expects U.S. growth to moderate during the second half of 2024.
The investment bank’s bear case for stocks is based on the notion that the megacap names that have driven much of the market’s rally over the past year will face an increasingly high bar to impress investors with their earnings and forecasts.
Investor positioning and valuations for these names already look stretched, according to Kolanovic. This means that at some point, the artificial-intelligence trade that has been holding up the market should reverse — and when that happens, the S&P 500 should see a major pullback.
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The Democrats will blame it all on Trump and none on Biden.
Trump’s rank Hitlerism drove Biden to retardation.
Biden was more Hilter than Trump before Trump ever came on the scene. 40 years of Hitlerism in the Senate and as VP.
The stock market has been bid up so high, for so long, 30% is nothing!
A decade of quantitative easing
“Stocks will fall 30%”
pay off your debt asap
Thanks for that, good stuff and scary at the same time.
Thanks for the information update..
🙏🙏
The Bible prophesied 7-year Tribulation is at humanity’s doorstep & the time to escape is very short. To read more, pls visit https://bibleprophecyinaction.blogspot.com/
I have always found it of interest that no matter what the stock market does people still produce food, hard goods, build houses, and carry on as usual.
To a point, remember the Great Depression.
lol its already started.
It started in 1913.
30% is a lite estimate.
Remember that whatever the value stated in Dollars, it buys 20% less than four years ago. 30% down from here only makes it much worse.
But why worry? Billionaires and banks can still go to the FED Window and borrow all they want, and the FED doesn’t even have to tell us if they get paid back. Such a deal.
When the people have no jobs or income, they stop spending money, and then all the large corporations and businessess have no customers, no one has the money to buy their goods and services.
However, when the homeless jobless people are robbing and staling and prostitutung themselves, they earn enough each day to support their drug habits=between 200 and 500 $ per day 7 days a week.
The CIA who runs all the drugs has trillions to put in the bank whlle other people starve and die. They will eventually put enough poiosns into the street drugs until they are as letaahl as the drugs doctors put in babies and everyone stupid enough to buy the lie that it is health care, when it is health destruction.
We who still have souls, must behave the way God wants us too behave. We should think about what we will see in the final judgement, that is either wrong or right, good or evil, what else maters at this point?
Money is the tool that satan and Moloch and Lucifer have used to take many souls from God. The people who have the most mony will never be able to ask for mercy, they have already built their cells in hell where they will spend eternity.
How could they ever explian to God what they had to do to make that much money?
It is never good things that make money, it is charity the highest form of Love and Jesus told us in the Bible, that gives money, gives not takes.
The rich are takers not givers, they have no treasure stored up in heaven.
They just have a huge debt to pay in Hell for all the sins they committed to get money.
No one who is rich did not do the will of Satan, Moloch, and Lucifer, to be compensated with millions and billions and trillions of dollars.
They did not become rich because they were smarter, better, or luckier.
They were chosen as easy targets. Easy souls to take from God.
Using wealth, power, prestige, fame,and pride, they were taken down to Hell while they climbed the pyramid of evil=under the complete control of the illuminati.
Who make money out of thin air and use it to do evil only.
If it is not something like covid or bill gates scams or something that will destroy people’s lives and cause death and destruction the devil who owns your private banking and fiance system, as a congame, the devil does not allow it to happen.
At the top Lucifer calls all ythe shots, because he does not allow any free will.
What you should value is GOD, and his love for you. Value that you have a soul, and can become an angel in heaven someday rataher than a demon in Hell because Jesus Chrsit came and died for your sins.
Be his instrument in this world, do his will alone and rejct the devil and his con games money haveing a real true value is the biggest lie you all believe.
This earth is your value, your homes, children and communitis need to return to all men being equal. That requires a loving community that is of God, not the devil and his money system he uses to take all the real wealth from you.
God created this earth for all of you to share equally in brotherhood.
Refuse the mark of the beast, refuse the new money system that is just slavery to the devil. Take back your land and your resources from thses monsters who are on their way to eternal Hell. They are not an NGO, they are servants of Lucifer, under his total control wwithout souls. They are the one world religion they want to impose on us all using the money system=satanism. Worship of the antichrist.
Please return to the real security and stability and protection in this world, that comes from God who answers our requests and our prayers.
One who loves you and will never abandon you. You have the free will to abandon God,
don’t do it. Lucifer is all hate, fear, cruelty, violence and sadism, he can only destroy life.
His money system has only ever made you slaves to him and kept you por and miserable without any stability, security or protection.
Recognize who the devil is, and drive them all out of america.
God will send them all back to Hell after the 3 days of darkness.
Love God not money, and you won’t go with them to eternal hell, when the black sun arrives, during ww3.
Live by God’s laws, not the devil’s laws. Depend on God alone. He will provide for you.
The bankers just want to take your souls to Hell, for their master=Lucifer.