FX168 financial news (North America) reported on Monday (July 8th) that the most pessimistic strategist on Wall Street said that the stock market will plummet by 32% in 2025 due to the failure of the Federal Reserve to prevent economic recession. #2024 investment strategy#

Peter Berezin, chief global strategist at BCA Research, said in a recent report that the US economy will fall into recession later this year or early 2025, and the economic recession will cause the S&P 500 index to fall to 3,750 points.

"The widespread ‘soft landing’ argument is wrong. The US will fall into recession at the end of 2024 or early 2025. Economic growth in other parts of the world will also slow significantly," Berezin said.

Berezin's bleak view is partly based on the view that the Federal Reserve will "delay" interest rate cuts, and the central bank will only significantly relax financial conditions before the economic recession is obvious.

By then, it will be too late.

Berezin emphasized that as the number of job vacancies has dropped significantly from the peak after the epidemic, the labor market is weakening. The sustained decline in job turnover and recruitment rates, as well as recent downward adjustments in employment reports for April and May, also indicate that the labor market is slowing down.

"Two years ago, unemployed workers could find new jobs just by crossing the street. Now it becomes increasingly difficult," Berezin said.

The June employment report showed that the unemployment rate rose slightly from 4.0% to 4.1%, which again indicated that the job market was slightly weak.

Berezin said that the rise in the unemployment rate may ultimately lead to consumers reducing spending to increase "precautionary savings", and this situation will decline as consumers' borrowing capacity decreases due to rising delinquency rates.

Ultimately, a negative feedback loop will form in the broader economy, leading to stock market turbulence.

"Due to the lack of accumulated savings and the increasingly tight supply of credit, many families have no choice but to curb their spending. A decrease in spending will lead to a decrease in recruitment. Rising unemployment will curb income growth, leading to a decrease in spending, and even an increase in the unemployment rate," Bersin explained.

Perhaps most importantly, the Fed's plan to ease economic decline through interest rate cuts simply won't work.

Berezin said, "It's important to recognize that what's important to the economy is not the federal funds rate itself, but the actual rates paid by households and businesses."

For example, the average mortgage rate paid by consumers is about 4%, while the current mortgage rate is about 7%.

This means that even if the Fed cuts interest rates and mortgage rates fall, the average mortgage rate paid by consumers will still continue to rise.

This principle also applies to loans for corporate and refinancing in the coming years.

"These dynamics will lead to more defaults and bring pain to the banking system. The problems that affected regional banks last year have not disappeared," Berezin said.