BCA Research is again sounding the recession alarm, warning traders to refrain from cheering this week’s tariff pause as the rate of the U.S. levies remains significantly higher compared with historical levels. This trading week was one of the most volatile on record. After a series of on-and-off again tariff announcements, President Donald Trump declared a three-month pause on his “reciprocal” tariffs on several countries, while simultaneously hiking those on China. Stocks immediately popped and notched historic gains on Wednesday, but lingering concerns dragged the market down once again on Thursday. The week ended on a high note as traders cheered the White House’s statement Friday that Trump is “optimistic” China will seek a deal with the U.S. Still, all three major indexes are in the red for this month and Wall Street remains on high alert to gauge the temperature of global trade tensions and changing economic conditions. BCA, for one, remains wary of ongoing tariff shocks, as well as potential cracks in the U.S. labor market and consumer spending. The firm reiterated its year-end S & P 500 forecast of roughly 4,450 — which implies a 17% drawdown from Friday’s closing level — and said the broad-market index could drop as low as 4,200 by the end of this year. “Despite postponing the ‘reciprocal’ tariffs, the current tariff rate is still the highest since at least the 1930s,” Peter Berezin, BCA’s chief global strategist, wrote in a note to clients. “Barring a dramatic further de-escalation of the trade war, the U.S. and much of the rest of the world will enter a recession over the next few months. Investors should remain defensively positioned for now.” .SPX 1Y mountain S & P 500 performance. Although U.S. tariffs on China will likely fall, the revised rate may be offset by higher sector-specific tariffs and a reversion to higher tariff rates for other countries that are unable to make a deal with Trump, Berezin said. “Uncertainty over trade policy is weighing on growth,” Berezin said, noting that U.S. real wage and salary income was just 1% higher year-over-year in February and is likely to turn negative later this year, causing a slowdown in consumer spending. “Based on the current P/E ratio, credit spreads, and commodity prices, financial markets are not yet fully pricing in a recession,” he warned. BCA holds one of the more extreme views on Wall Street — but its pessimism has proved largely correct so far this year. The firm in March downgraded equities to underweight and upgrading fixed income and cash to overweight, saying President Donald Trump’s tariffs and federal spending cuts made by the Department of Government Efficiency could lead the U.S. economy into a recession. In June, the firm had said that its models show the recession will come in late 2024 or early 2025. Get Your Ticket to Pro LIVE Join us at the New York Stock Exchange! Uncertain markets? Gain an edge with CNBC Pro LIVE , an exclusive, inaugural event at the historic New York Stock Exchange. In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12. Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!
