Despite recent US-China trade negotiations, BCA Research’s Peter Berezin maintains a bearish outlook for Wall Street, forecasting a 25% drop in the S&P 500 to 4,450 by 2025. He warns that the effective US tariff rate remains high, negatively impacting disposable income. While his recession probability has decreased to 60%, he cites ongoing labor market weaknesses and consumer spending concerns. Although the recent tariff reductions may seem positive, Berezin emphasizes that the trade war isn’t over. He highlights potential for a fiscal crisis, coinciding with market fluctuations and the rise of tech stocks in a renewed risk environment.
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The recent US-China trade thaw hasn’t influenced Wall Street’s most prominent bear.
“We still anticipate a recession as our primary scenario. Although tariffs have decreased, the effective tariff rate in the US remains the highest since the 1930s. Furthermore, the US economy was on a weaker path than most assumed even before the trade conflict started,” cautioned Peter Berezin, chief strategist at BCA Research, in a recent note. “Markets are not reflecting a significant recession risk, suggesting a careful approach to equities is advisable.”
Berezin became notable as the sole bear on Wall Street heading into 2025, with the lowest price target on the S&P 500 (^GSPC), set at 4,450. His bearish stock predictions have generally been accurate, especially after the market decline following “Liberation Day.” Additionally, US GDP fell by 0.3% in the first quarter.
In 2022, Berezin also accurately predicted there would be no recession in the US, despite many on Wall Street anticipating one. With over 30 years of experience, he has held positions at the International Monetary Fund (IMF), Goldman Sachs, and currently at BCA Research.
In his latest report, Berezin did adjust his recession probability down to 60% from 75%. Yet, he highlights concerns regarding labor market weaknesses and consumer spending during a period of notable tariff anxieties.
“If current tariff levels persist, they will cut disposable income for the average US household by approximately 2%, with more severe impacts on lower-income families,” Berezin explained.
Listen: Why the tariff thaw isn’t particularly optimistic for stocks
He reiterated his prediction that the S&P 500 could decline by 25% from current levels, potentially reaching 4,450 by the end of 2025, reflecting his cautious outlook on the US economy.
“While not our primary scenario, we would attribute a 30% chance to a significant fiscal crisis this year — one that could push the 10-year Treasury yield above 6%,” Berezin added.
This occurs as the markets are trending upward.
On Monday, the US and China agreed to ease the tariff battle for 90 days as both economies begin to feel the impact of harsh penalties.
Following high-level discussions in Switzerland over the weekend, the US will lower “reciprocal” tariffs on Chinese goods from 125% to 10%. A separate 20% tariff imposed by Trump regarding China’s involvement in the fentanyl trade will remain unchanged.
China will also reduce its retaliatory tariffs on US products from 125% to 10%.
The S&P 500 regained its losses for the year on Tuesday but lost some ground on Wednesday. The tech-focused Nasdaq Composite (^IXIC) entered a new bull market on Monday.