Wall Street recently "taking turns to be bearish": If the U.S. economy weakens, U.S. stocks will fall by 30%

The Sword of Damocles hangs over the US stock market: Consumer weakness.

Recently, Goldman Sachs and JPMorgan Chase have come out to bearish on the US stock market, believing that the continuously expanding fiscal deficit and highly concentrated gains are accumulating risks.

According to media reports, Peter Berezin, Chief Global Strategist at BCA Research, also stated in a report this Thursday that he has lowered the annual target for the S&P 500 index to 3750 points, below JPMorgan Chase's forecast of 4200 points, which is already the lowest among various Wall Street investment banks' year-end target predictions for the S&P.

Based on Berezin's forecast, using Friday's closing price as a reference, the S&P is expected to fall by more than 30% cumulatively this year, and the pain of economic downturn will spread from the US stock market, putting pressure on global stock markets.

Consumer weakness may be the biggest drag

In Berezin's view, the upcoming reason for the decline in the US stock market is: the labor market is slowing down rapidly, putting immense pressure on consumer spending, causing this important engine driving US economic growth to malfunction.

Berezin cited a series of data indicating that currently, the number of job vacancies in JOLTS has dropped significantly, voluntary resignation rates, especially in the private sector, are accelerating, and the non-farm payroll survey shows a slowdown in wage growth. Economic data, including the recently released PCE price index, also shows signs of consumer weakness.

Furthermore, bank savings data also show that lower-income Americans seem to have exhausted their savings during the COVID-19 pandemic, and credit card and auto loan delinquency rates have reached their highest levels since 2010 and are still rising. Considering that commercial banks may choose to tighten loan standards in the future, consumer pressure is expected to continue to build up.

Consumer weakness will trigger a series of economic vicious cycles, ultimately leading to an economic recession.

Berezin also added that even if the anticipated economic recession arrives, the Federal Reserve may not immediately take interest rate cuts due to concerns about reigniting inflation. At the same time, the massive size of the deficit has left the US government breathless, and the effects of monetary stimulus may not be as ideal.

JPMorgan Chase's strategic analyst Marko Kolanovic also believes that the challenges the US stock market may face in the coming months are mainly due to the slowing US economic growth, downward revisions in corporate earnings, and other multiple unfavorable factors