MW Wall Street's biggest bear says the S&P 500 could drop to 4,200. Here's his advice for right now.

By Barbara Kollmeyer

BCA's Peter Berezin says the U.S. may already be in recession

Heading into 2025, most Wall Street strategists were predicting further gains after missing last year's 23% advance for the S&P 500.

But there was lone Wall Street bear, BCA Research's chief global strategist Peter Berezin, whose year-end S&P 500 SPX target of 4,450 compared to the 6,500 average, and Oppenheimer's 7,100 top.

MarketWatch caught up with Montreal-based Berezin who says a looming recession makes stocks a tough investment.

Their worst-case scenario implies a 4,200 bottom for the index this year, the strategist said. And that includes two assumptions: S&P 500 forward earnings multiples dropping to 17, from around 21 currently, and earnings estimates falling 10%.

"Given earnings are expected to grow by over 10% over the next 12 months, that would just leave earnings sort of flat from here," he said.

"I think that driver will be a recession," said Berezin. "Earnings and the economy are highly correlated, so it's kind of hard to see one happening without the other."

He sees a 50-50 chance the U.S. is already in a recession, and while that won't be known for a while, "March could very well be the start date for this recession," he said.

Berezin said his research house was among the few that boosted recession probabilities following the U.S. election. "We did so because we thought that Trump would be disruptive in some positive ways, but also very disruptive in some negative ways, most of which is trade."

Berezin said he never went along with what seemed like post-election Wall Street consensus - that tariffs were just a negotiating tool. He was convinced Trump wanted tariffs because "he's a protectionist at heart," and needs the money because of the sizable budget deficit.

"I have to say I didn't think it would happen that quickly, I didn't think we would be at 25% tariffs on Canada and Mexico by early March...things have actually soured even more quickly than anticipated," he said.

He said he turned negative on stocks in mid-2024, clearly too early, but isn't a permabear, saying he was among the few who saw no recession risk for the U.S. economy in 2022 and was upbeat also in 2023.

And what's Berezin's advice for right now? "I think you should largely step away from stocks. I mean, if you need to be invested, then by all means, move your portfolio toward the more defensive sectors, such as consumer staples, healthcare, utilities, maybe to some extent," he said.

That means also avoid struggling tech, consumer discretionary, industrials, materials, financials - a strong performer so far this year - high-yield credit and crypto, he said.

"So you want to own more bonds. You want to own more cash. You want to own more gold. If you can do currency trades, you want to own the very safe, defensive currencies, such as the Japanese yen, the Swiss franc. So there are places to hide, you're not going to make a lot of money there, but you certainly will potentially avoid losing a lot of money," he said.

Investors with a 10-year horizon may find it tough to position, he said. They could try to lock in their money with cheaper parts of the market, international and value stocks, but "these parts of the market don't do well during recessions."

Those who don't want to part with their favorite stocks can "buy some protection on the overall portfolio" through puts, which are options that allow for the sale of stocks at a set price by a specific date.

As for what could turn the tide on his downbeat view, Berezin said a complete pivot by Trump away from his tariff agenda, though stocks would also have to "go down quite a lot" for that to happen.

Read: Is the White House trying to engineer a recession? This Wall Street pro explains the vision.

The markets

U.S. stock futures (ES00) (YM00) (NQ00) are climbing, a day after the S&P 500's post-election gain wipeout, with Treasury yields BX:TMUBMUSD10Y BX:TMUBMUSD02Y up. The dollar DXY is sinking versus the euro $(EURUSD.FOREX)$, and German bund yields BX:TMBMKDE-10Y are soaring on the country's spending-spree plans.

   Key asset performance                                                Last       5d      1m      YTD     1y 
   S&P 500                                                              5778.15    -2.99%  -4.67%  -1.76%  13.19% 
   Nasdaq Composite                                                     18,285.16  -4.14%  -7.15%  -5.31%  14.06% 
   10-year Treasury                                                     4.257      -0.60   -17.50  -31.90  15.60 
   Gold                                                                 2925.6     -0.21%  1.40%   10.85%  35.66% 
   Oil                                                                  68.02      -1.16%  -4.39%  -5.36%  -14.03% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

The U.S. commerce secretary said a deal to roll back U.S. tariffs on Canada and Mexico may be in the works. Ahead of that, Trump told Congress tariffs will be "a little disturbance," though economists don't agree.

Read: Trump repeats DOGE claims of 150-year-old Social Security beneficiaries.

CrowdStrike $(CRWD)$ is down 9% after a bigger-than-expected loss and disappointing guidance.

ADP private-sector payrolls are due at 8:15 a.m., with factory orders and the Institute for Supply Management's services index are coming at 10 a.m.

China stuck to a 2025 growth target of "around 5%," at the annual meeting of the country's legislature.

Best of the web

People are paying millions to dine with Trump at Mar-a-Lago.

The Trump voters who are losing patience.

Half of world's CO2 emissions come from 36 fossil fuel firms.

The chart

The chart from the brokerage shows what happens to momentum stocks - the best recent performers that investors chase for more gains - following an extreme unwind in growth indexes such as the Russell 2000 Growth XX:RUO, down 7% so far this year. "When such an extreme move happened last in 2022, we saw an extended period of growth unwinding. However, 30 years of history also shows that markets usually bounce back over the next month, but momentum stocks lag," said strategists led by Desh Peramunetilleke.

Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   GME     GameStop 
   PLTR    Palantir Technologies 
   TSM     Taiwan Semiconductor Manufacturing 
   SMCI    Super Micro Computer 
   MSTR    MicroStrategy 
   AAPL    Apple 
   AMZN    Amazon.com 
   BABA    Alibaba 

Random reads

The first Loch Ness Monster sighting of 2025.

Land ho for the world's biggest iceberg, to the relief of penguins.

This otherwise calm fishing trip was interrupted by a 900-pound dolphin coming on board.

-Barbara Kollmeyer

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

March 05, 2025 06:37 ET (11:37 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.