US Economy Faces Recession Risk Amid Persistent Market Volatility, Expert Warns
The economic scars left by the Great Recession of 2008-2009 remain unhealed, and the financial blow dealt by the Covid-19 pandemic has only compounded the challenges facing the United States.
Concerns about the stability of financial markets are resurfacing, with predictions of increased volatility ahead. BCA Research, a Canadian investment research organization, has issued a warning about potential turbulence in the US stock market.
In a recent note to clients, Peter Berezin, the chief global strategist at BCA Research, cautioned that the US economy is likely to fall into a recession either this year or in early 2025.
According to a report by Fox Business, Berezin’s forecast challenges the prevailing belief that the economy would maintain its growth trajectory. He suggests that if a recession does occur, the S&P 500 could plummet to 3,750, representing a significant 30% decline from current levels.
READ ALSO:
Jeff Bezos Plans to Sell $5 Billion in Amazon Shares Following Record Stock Surge
Berezin’s prediction is based on the expectation that the labor market will experience a notable slowdown in the coming months. This anticipated weakening in labor demand is expected to have a significant impact on consumer spending, which is a primary driver of economic growth.
The relationship between inflation and unemployment, often measured by the “Phillips curve,” plays a crucial role in his analysis.
“The reason the U.S. avoided a recession in 2022 and 2023 was because the economy was operating along the steep side of the Phillips curve. When the labor supply curve is nearly vertical, weaker labor demand will mainly lead to lower wage growth and falling job openings. In other words, an immaculate disinflation.”
Berezin also foresees broad economic challenges beyond the US, predicting significant slowdowns in growth in China and Europe. These global economic headwinds could further strain the international stock markets and contribute to a weakening global economy.
The Dow Jones Industrial Average, which broke through the 40,000 mark for the first time in mid-May, has since retreated from those record highs. This market volatility underscores the uncertainty and potential risks highlighted by Berezin.
READ ALSO:
New Zealand Proposes Law to Secure Media Revenue from Facebook and Google
His prediction stands out as one of the more pessimistic forecasts on Wall Street, coming after a particularly turbulent year for the market. With the potential for a recession looming, investors and policymakers alike must navigate these uncertain times with caution and strategic foresight.
As the US economy grapples with these challenges, the insights from Berezin and other financial experts serve as crucial guidance for understanding and preparing for the possible economic shifts ahead. The interplay between labor market dynamics, consumer spending, and global economic conditions will be key factors to monitor in the coming months.