Why Wall Street's biggest bear still expects a recession and much lower stock prices

The new US-China trade thaw hasn’t shaken Wall Street’s biggest bear.

“We continue to see a recession as our base case. Although tariffs have come down, the effective US tariff rate is still the highest since the 1930s. The US economy was also on a weaker footing than widely believed even before the trade war began,” BCA Research chief strategist Peter Berezin warned in a new note. “Stocks are not pricing in much recession risk, which suggests that a cautious stance towards equities is warranted.”

Berezin gained attention for being the lone bear on Wall Street coming into 2025 and sporting the lowest price target on the S&P 500 (^GSPC) at 4,450. His bearish call on stocks has mostly been right, at least up to the recent rally after the market tanked post-“Liberation Day.” And on the economy, US GDP contracted 0.3% in the first quarter.

In 2022, Berezin also correctly called that there would be no US recession, despite most on the Street bracing for one. He’s been an economist for more than 30 years, with stints at the International Monetary Fund (IMF), Goldman Sachs, and now BCA Research.

In his latest note, Berezin did take his recession probability odds down to 60% from 75%. But he points to weakness in the labor market and consumer spending during a time of considerable tariff fears as key reasons for his economic concerns.

“If existing tariff rates remain in place, they will reduce disposable income for the median US household by about 2%, with larger effects for lower-income families,” Berezin explains.

Listen: Why the tariff thaw isn’t super bullish for stocks

He reiterated a call for the S&P 500 to plunge 25% from current levels to end 2025 at 4,450, backed up by his cautious view on the US economy.

“While not our base case, we would assign 30% odds to a major fiscal crisis this year — one that takes the 10-year Treasury yield north of 6%,” Berezin added.

This comes as the markets are moving back up and to the right.

The US and China agreed on Monday to ratchet down the tariff war for 90 days as each economy begins to feel the pressure of bruising penalties.

After a weekend of high-level meetings in Switzerland, the US will reduce “reciprocal” tariffs on goods from China to 10% from 125%. A separate 20% tariff imposed by Trump over what he says is China’s role in the fentanyl trade will remain intact.

China will cut its retaliatory tariffs on US goods to 10% from 125%.

The S&P 500 reversed its losses on the year on Tuesday but gave back some gains on Wednesday. The tech-heavy Nasdaq Composite (^IXIC) entered a new bull market on Monday.

The “Magnificent Seven” complex — Apple (AAPL), Microsoft (MSFT), Meta (META), Tesla (TSLA), Nvidia (NVDA), Amazon (AMZN), and Alphabet (GOOG) — are back leading the market higher in a clear show of renewed risk appetite.

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But to Berezin’s point, the trade war with China is far from finished.

“Well, I don’t think it will ever quite be over, but what will be over are these tariffs up over 100%,” billionaire businessman and longtime Trump confidant Wilbur Ross told me on Yahoo Finance’s Opening Bid podcast (see video above).

Ross added, “There’s probably always a 20% or 25% chance of recession, and it’s been many years since we had a real recession. COVID, you have to put to the side because that was not an economic recession — that had to do with the horrible epidemic. So it’s been a long time, and we’re therefore due for a recession at some point.”

Brian Sozzi is Yahoo Finance’s Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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