US economy has been facing escalating concerns over its financial stability. Experts have predicted potential recession risks with significant implications for global financial markets.
BCA Research, a prominent Canadian investment research firm, has raised alarms about the possibility of a recession looming on the horizon. According to their latest analysis, the US economy could experience a downturn either by the end of this year or in early 2025, marking a critical juncture since the tumultuous periods of the Great Recession and the Covid-19 economic crisis.
Peter Berezin, Chief Global Strategist at BCA Research, highlighted in a recent client note the vulnerability of the US stock market, suggesting a potential 30% decline in the S&P 500 index to approximately 3,750 if a recession materializes. Berezin attributed this forecast to anticipated slowdowns in the labor market, which could significantly dampen consumer spending—a crucial driver of economic growth.
“The US economy managed to avoid recession in recent years due to its position along the steep side of the Phillips curve,” noted Berezin, emphasizing the delicate balance between inflation and unemployment. However, he cautioned that a shift towards weaker labor demand could lead to reduced wage growth and job opportunities, thus triggering a period of disinflation.
Adding to the economic challenges, Berezin pointed out broader global factors contributing to potential downturns, including slowing growth in major economies like China and Europe. Such developments could further exacerbate pressures on international stock markets, compounding the economic uncertainties.
Despite recent record highs in the Dow Jones Industrial Average, including a breakthrough above 40,000 in mid-May, subsequent declines have underscored the volatility and underlying risks in the current economic landscape.
while the outlook remains fluid, BCA Research’s sobering projections highlight the need for vigilance amid evolving economic conditions both domestically and globally