That number is expected to drop to 3,750 by 2025, according to a research note from analysts at BCA Research on Friday.
They argue that the global stock market has suffered a ‘one-two punch’, starting with growing skepticism about the bullish narrative surrounding artificial intelligence (AI), followed by increasing concerns about global economic growth, especially in Europe and China.
These concerns have now spread to the United States, fueled by a surprising increase in the unemployment rate, according to BCA Research.
They believe that weaker growth rates have prompted investors to anticipate earlier central bank rate cuts. However, they add that this expectation initially destabilized financial markets, mainly by triggering an unwinding of carry trading in the yen.
The collapse of the carry trade in the yen, along with the reversal of other ‘low vol’ strategies popular among hedge funds, such as the ‘dispersion trade’, has contributed to market volatility, BCA Research explains.
While the market could stabilize in the short term, BCA Research expects the medium-term direction to be downward.
They predict that the US will enter a recession in late 2024 or early 2025. While future Fed rate cuts could ultimately boost growth, BCA Research warns that these benefits could come too late, as has happened in previous cycles when recessions followed shortly after the Fed cut rates. started lowering rates.
“While stock prices should stabilize in the short term, the medium-term direction is downward,” BCA wrote. “We continue to expect the US to enter a recession in late 2024 or early 2025.”
“We expect the S&P 500 to fall to 3750 in 2025 and then decline to 3%,” BCA added. They warn that the events of the past few weeks are a preview of what is to come for investors.
