Wall Street sage issues grim warning about the S&P 500 and the chances of a recession – here is what it means for 401(K)s

A top banking analyst has predicted that US stocks could soon fall by 30 percent.

Peter Berezin, chief global strategist at BCA Research, told clients last week that the U.S. economy could enter a recession later this year or in early 2025.

If the US does indeed enter a recession, as Berezin predicts, the S&P 500 will fall to 3,750, he says, a 30 percent drop from current levels.

Berezin is concerned about the economy as he believes the labor market could slow down significantly in the coming months.

Lower employment would take a heavy toll on consumer spending, a key driver of economic growth.

The S&P 500 is up more than 15 percent so far this year, while the Dow Jones is up about 3.8 percent.

A crash would also affect Americans’ retirement accounts.

Most have at least a portion of their 401(K) and IRA invested in the Dow Jones, the S&P 500 and the Nasdaq.

“The reason the US avoided a recession in 2022 and 2023 was because the economy was on the steep side of the Phillips curve,” he wrote in the note.

The Philips curve is an economic theory that states that there is an inverse relationship between unemployment and inflation: as the former rises, the latter will fall.

‘If the labor supply curve is nearly vertical, weaker demand for labor will mainly lead to lower wage growth and a decrease in the number of vacancies.

“In other words, impeccable disinflation,” he added.

Berezin also told the company’s customers that slowing growth in Europe and China could lead to further economic problems.

Such a scenario, he said, would weaken global growth and cause international stock prices to fall.

The somber argument comes after the Dow Jones hit a record high in May, breaking above 40,000 for the first time. 39,331 is currently just below the milestone.

The S&P 500 has already risen by more than 16 percent this year, and the tech index Nasdaq has even risen by as much as 22 percent.

The increase also worries other analysts.

One of them is Sam Stovall, the chief investment strategist at CFRA Research, who warned last month that stocks are headed for a “correction.”

“I’m increasingly concerned that we’re going to have to endure another 5 percent decline or more before the year is out,” Stovall told Yahoo.

In recent weeks, top bankers and even a former CEO have issued chilling warnings about the US economy.

In May, Jamie Dimon, head of the world’s largest bank JPMorgan Chase, said that the worst outcome for the American economy would be ‘stagflation’.

This is when inflation continues to rise, but unemployment is high and growth is slowing.

JPMorgan Chase CEO Jamie Dimon has said he cannot rule out a ‘hard landing’ for the US

Economists consider stagflation, last seen in the U.S. in the 1970s, to be worse than a recession. It would send stocks plunging, hitting 401(k)s and other retirement savings plans.

“I’m increasingly concerned that we’re going to have to endure another 5 percent or more decline before the end of the year,” Stovall said in June.

The upward trend has also raised concerns Sam Stovall, chief investment strategist at CFRA Research, warned last month that stocks are headed for a “correction.”

“I’m increasingly concerned that we’re going to have to endure another 5 percent or more decline before the end of the year,” Stovall said in June.