The S&P 500 is set to take a nosedive in 2025, with a predicted 32% plunge as a recession finally hits the US economy, according to BCA Research. The firm’s chief global strategist, Peter Berezin, is sounding the alarm, warning that the Federal Reserve’s slow response in cutting interest rates will fail to prevent the impending economic downturn.
Berezin’s bearish outlook is based on several factors, including a weakening labor market with declining job openings and rising unemployment rates. As job opportunities dwindle, consumers may start to pull back on spending in order to save for an uncertain future. Additionally, constrained credit availability due to rising delinquency rates could further exacerbate the situation, leading to a negative feedback loop in the economy.
Despite the Fed’s efforts to stimulate the economy through interest rate cuts, Berezin believes that the impact on households and businesses may be limited. The average mortgage rate paid by consumers, for example, is currently much higher than the prevailing rates, meaning that even if the Fed cuts rates, consumers may not see much relief.
Overall, Berezin’s grim predictions paint a bleak picture for the US economy in the coming years, with potential repercussions for the stock market and banking system. As the threat of a recession looms, investors and policymakers will need to brace themselves for a challenging economic landscape ahead.
