Peter Berezin is one of few Wall Street strategists who disagree with the optimistic outlook for market growth in 2025. He’s chief global strategist at BCA Research.
His view is at odds with the mainstream predictions.
Berezin’s S&P 500 year-end price target is only 4,450, which is far below both the average consensus of 6,500 as well as Oppenheimer’s bullishest target of 7,100.
He is concerned about the economic contraction, and he also believes that corporate earnings will be weakening in the short term.
Berezin, in an interview with MarketWatch said that his worst case scenario envisages the S&P 500 dropping to 4,200. This is due to two factors. A decline in forward earning multiples, from 21 to 17, and a drop of 10% in estimates for corporate earnings.
Berezin stated that “given the earnings growth expected over the next twelve months, this would leave earnings kind of flat going forward.”
He said, “I believe that the main driver of this will be a downturn.”
It’s hard to imagine the economy without earnings.
Berezin believes that there’s a 50% chance of the US being in recession already, and March could be its start.
Economic downturn accelerated by trade disruptions
Berezin is concerned about the recession primarily because of trade policy.
BCA Research raised its estimates of recession probabilities following the US elections, anticipating Trump’s return to cause trade disruptions.
Berezin says that while many analysts thought Trump’s threats to impose tariffs were just a negotiation tactic, the former president has a “protectionist heart” and is desperate for money due to the large budget deficit.
Even Berezin was surprised by the rapidity of the new tariffs.
It’s a fact that things have deteriorated even faster than expected. I did not expect it to happen so quickly. I also didn’t anticipate we’d be at a 25% tariff on Canada and Mexico as early as March.
He says that the trade policies may have a negative impact on consumer confidence and corporate profits, further accelerating recessionary pressures.
Avoiding stocks and finding shelter
Berezin admits that, looking backwards, he was too early in his negative view of stocks. But he maintains that it is now the right time to pull investors out of equities.
I think that you should stay away from stocks. “I mean, by all means move your portfolio to the more defensive sector, like consumer staples. Healthcare, utilities and maybe even to some degree, I said.”
These sectors are more stable during downturns and offer stability to growth stocks.
He is still bearish on sectors with high risks, such as technology, consumer discretionary and industrials.
In his opinion, high-yielding credit cards and cryptocurrency are also unattractive.
Berezin recommends that investors invest their capital in safer assets.
You want to buy more bonds. You would like to have more money. You would like to have more cash. You want to buy the safest, most defensive currencies such as the Japaneseyen and the Swiss Franc if you are able to do currency trading. There are many places where you can hide. You won’t make much money, but at least you will avoid losing money,” said he.
He acknowledges that investors who have a 10-year time horizon face a challenge in determining their position within an environment so uncertain.
He warns, however, that while international stocks and value shares may seem attractive to some investors during a recession they tend to perform poorly.
If you are hesitant to sell your holdings, consider protecting them with put options.
What can change the future?
Berezin’s outlook could change despite his pessimistic stance if there is a major shift in the trade policies.
Berezin predicted that Trump would completely abandon his tariffs agenda. However, stocks must also “go down a great deal” before this could happen.
Berezin is one of few who urge caution and warns investors that economic uncertainties are increasing.
The post Wall Street Bear Peter Berezin: US recession could be already underway – here’s where to buy and what to invest, may change as new information is revealed.
