Financial Markets Volatility: BCA Research Warns of Possible Recession and Significant S&P 500 Drop in Days Ahead

The aftermath of the Great Recession of 2008-2009 has still not been fully recovered from, and the recent economic downturn due to Covid-19 has added to the woes in the United States. Now, concerns about the stability of financial markets are resurfacing with BCA Research, a Canadian investment research organization, predicting volatility in the US stock market in the days ahead.

According to a report by Fox Business, BCA Research’s chief global strategist Peter Berezin has warned clients that the economy could slip into a recession either this year or in early 2025. This prediction suggests that if a recession were to occur, the S&P 500 could see a significant drop to 3,750, marking a 30% decrease from current levels. Berezin’s forecast is based on the assumption that the labor market will slow down significantly in the near future, putting a strain on consumer spending, which is a key driver of economic growth.

Berezin points to the relationship between inflation and unemployment, as represented by the Phillips curve, to support his analysis. He highlights that while weaker labor demand led to lower wage growth and fewer job openings in recent years and resulted in disinflation – meaning lower prices – he now anticipates challenges in economic growth due to slowdowns in China and Europe which could impact global economies and put pressure on international stock markets.

Despite optimism earlier this year with Dow Jones Industrial Average reaching a record high of 40,000 in May