As the world grapples with the economic downturn caused by Covid-19, concerns about the stability of the financial markets are resurfacing. Peter Berezin, chief global strategist at BCA Research, has warned clients that the US economy may fall into a recession either this year or in early 2025. He predicts that the S&P 500 could drop to 3,750, a 30% decrease from current levels.
Berezin’s prediction is based on his analysis of the relationship between inflation and unemployment, also known as the “Phillips curve.” He believes that while the US avoided a recession in 2022 and 2023 due to operating along the steep side of the curve, resulting in an “immaculate disinflation,” this trend will not continue indefinitely. The slowing labor market will impact consumer spending, which is a key driver of economic growth.
In addition to challenges within the US economy, Berezin also foresees difficulties in other parts of the world. Notable slowdowns in growth are expected in China and Europe, which could put pressure on international stock markets. Despite hitting a record high in mid-May, the Dow Jones Industrial Average has dropped from those peaks.
This grim prediction comes at a time when many investors are already struggling with market volatility and uncertainty. It is one of several pessimistic outlooks on Wall Street and serves as a reminder that even after years of recovery from past recessions, it is important for investors to remain vigilant and adapt their strategies accordingly.