Why a top market strategist says his base case is still a 25% stock drop and a recession in 2025
At a time when strategists across Wall Street are dialing back their recession probabilities, Peter Berezin of BCA Research is doubling down.
President Donald Trump's 90-day tariff pause was enough to ease the worries of some investors, but the chief global strategist at BCA has maintained his bearish outlook.
While Berezin has lowered his recession outlook from Liberation Day levels, he still expects an economic slowdown to unfold this year.
"I've brought down my recession probability from 75% to 60%, so it's not an overwhelming likelihood of recession, but it is still my base case. And in that base case, I would expect the S&P to trade down to around 4,500," Berezin told Business Insider. That would mark a 25% decline for the benchmark index from levels on Friday.
While 4,500 sounds like a steep drop from the near-record highs the stock market is trading out now, Berezin doesn't think it'll take much to trigger the fall.
A plunge to that level would require the S&P 500 to trade at 18 times earnings with EPS of $250. The index is currently trading at around 23 times earnings with EPS of around $260 — not too far off, in Berezin's opinion.
"At this point, it's hard to make a case to be very optimistic on either the stock market or economy," Berezin said.
A slowing economy
The economy was already showing signs of weakness prior to the trade war fallout, Berezin said.
Back in December of 2024, Berezin was calling for a recession in 2025 coupled with a stock market plunge of over 20%. His S&P 500 target of 4,452 was one of the lowest on Wall Street.
Today, Berezin is concerned about continued trade uncertainty, a growing deficit, and a weakening consumer.
Job openings have been on a downward trend since early 2022, "removing a lot of insulation that had protected the labor market," Berezin said.
Indeed, other economists agree that the labor market might be weaker than it seems — Sam Tombs of Pantheon Macroeconomics is concerned with slowing hiring and declining small business sentiment.
Berezin also points out that consumer delinquency rates on credit cards and auto loans have been rising. In the first quarter of 2025, credit card delinquencies hit 3.05%. That's the highest level since 2011, "a year in which the unemployment rate was 8%," Berezin said.
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Furthermore, as student loan collections restart after a five-year hiatus amid the pandemic, consumers' credit scores are taking an even bigger hit.
The housing market has also been a pressure point in the economy since COVID, with home affordability and inventory challenges mounting for buyers.
Berezin pointed to falling construction in May—housing starts dropped 9.8% in the month— as another sign of a slowdown.
Tariffs are still a threat
The effective tariff rate is hovering around 15%, which is still a level that Berezin considers dangerous.
"There's probably no ideal for a tariff rate, but there are numbers that are more punitive for the economy than others," he said.
If Trump doesn't solidify trade deals soon, the economy could be in store for some major pain as businesses start to pass along price increases to consumers.
A tariff rate lower than 10% would be less disruptive to the economy, but Berezin isn't hopeful that Trump will lower his policies to that level.
"Since tariffs on China probably will be higher than tariffs in other countries, that means Trump would have to roll back his 10% base tariff that he's applied to almost all countries," Berezin said. "I don't see him doing that unless the market forces him to do it."
In fact, Berezin thinks Trump might even increase tariffs on some industries such as pharmaceuticals, semiconductors, and lumber.
Berezin doesn't see an easy way around an impending recession.
Some strategists might be hoping for Trump's Big Beautiful Bill to boost the economy through tax cuts, but unfunded tax cuts could push bond yields higher and cancel out any any stimulus.
According to the Congressional Budget Office, while the tax bill would increase GDP growth by 0.5% on average over the next 10 years, it would also push up 10-year Treasury yields by 14 basis points and increase the deficit by $2.8 trillion.
A stock market crash and economic downturn could actually be the turning point for Trump to reverse course on his policies, Berezin said. The S&P 500 dipping below 5,000 and the 10-year Treasury yield spiking above 4.5% probably influenced Trump to paus tariffs for 90 days, Berezin added.
"We could get more tariff relief, but the market has to force that. I don't think it's going to come from any other source," he said.
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