BCA Research chief strategist Peter Berezin is warning investors to stay cautious. In a new note, Berezin said that while President Trump’s decision to partially roll back tariffs lowers the chances of a deep U.S. recession, stocks are still not priced for even a mild one, which means that risks remain skewed to the downside. Berezin, who accurately predicted no recession in 2022 when many others expected one, continues to call for a 75% chance of a recession this year, with the S&P 500 (SPX) falling to 4,450 from its current level around 5,525.
Berezin pointed to a few reasons for his bearish view. First, even with recent tariff changes, the U.S. effective tariff rate is still the highest since the 1930s. This uncertainty is already causing companies to cut back on investments, which could hurt the job market. Consumer spending could also weaken, as higher prices take a toll. For example, Procter & Gamble (PG) CEO Jon Moeller recently said that laundry loads per week have dropped from five before the pandemic to about three and a half now, a sign of a consumer pullback. P&G even cut its full-year sales and profit outlook because of economic concerns.
Second, Berezin noted that U.S. economic data was already softening before the latest trade tensions. Indeed, the Atlanta Fed and Goldman Sachs both estimate that first-quarter GDP contracted slightly, while consumer sentiment has also weakened. At the same time, the stock market doesn’t seem to be pricing in a slowdown, as the S&P 500’s forward P/E ratio of 19.9 is much higher than the lows seen during past recessions. As a result, despite a recent rebound, Berezin believes that U.S. stocks could underperform over the next several years.
Is SPY a Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust (SPY) based on 406 Buys, 91 Holds, and seven Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $656.06 per share implies 19.4% upside potential.
