American stocks are facing the sword of Damocles: weak consumer demand.

Recently, Goldman Sachs and JPMorgan have both come out to short the U.S. stock market, believing that the expanding fiscal deficit and highly concentrated gains are accumulating risks.

According to media reports, Peter Berezin, Chief Global Strategist of BCA Research, also lowered the annual target for the S&P 500 index to 3750 points in a report on Thursday this week, below JPMorgan's forecast of 4200 points. The latter is already the lowest level of S&P year-end target predictions among Wall Street investment banks.

According to Berezin's prediction, based on Friday's closing price, the S&P will accumulate a drop of more than 30% in the year, and the pain of the economic downturn will spread from the U.S. stock market to the global stock market.

Weak consumer demand may be the biggest drag.

In Berezin's view, the reason for the next decline in U.S. stocks is that the labor market is decelerating rapidly, putting huge pressure on consumer spending and causing this important engine driving US economic growth to malfunction.

Berezin cited a range of data to suggest that JOLTS job vacancies have fallen sharply, especially in the private sector, while the quit rate has also accelerated, and non-farm surveys show wage growth has slowed. Economic data, including the newly released PCE price index, also shows signs of weak consumer demand.

In addition, bank savings data shows that lower-income Americans seem to have exhausted their savings during the COVID-19 outbreak, and delinquency rates for credit cards and auto loans have reached their highest levels since 2010 and are still rising. Given that commercial banks may choose to raise lending standards next, consumer pressure is expected to continue to accumulate.

Weak consumer demand will trigger a series of economic vicious cycles, ultimately leading to an economic recession.

Berezin also added that even in the expected event of an economic recession, the Federal Reserve may not immediately take interest rate cuts due to concerns about reigniting inflation; meanwhile, the size of the huge fiscal deficit has left U.S. finances struggling to breathe, and the effect of monetary stimulus is not necessarily ideal.

Marko Kolanovic, a strategist at JPMorgan, also believes that the main problems facing U.S. stocks in the next few months are the slowdown in U.S. economic growth and downward revisions to corporate profits, among other multiple unfavorable factors.

Editor/Somer