The most pessimistic strategist on Wall Street is bearish on US stocks, warning that an economic recession will trigger a 32% stock market crash

According to the financial news app Smart Finance, the most pessimistic strategist on Wall Street stated that due to the Federal Reserve's failure to prevent an economic recession, the stock market will plummet by 32% in 2025.

Peter Berezin, Chief Global Strategist at BCA Research, stated in a recent report that an economic recession will hit the U.S. economy later this year or early in 2025, causing the S&P 500 index to fall to 3750 points.

"The commonly believed soft landing theory is wrong. The U.S. will fall into a recession at the end of 2024 or early 2025. Growth in other parts of the world will also sharply slow down," Berezin said.

Berezin's pessimistic outlook is partly based on the view that the Federal Reserve will "drag its feet" on interest rate cuts, and will not intentionally loosen the financial environment until the economy clearly deteriorates.

By then, it will be too late.

Berezin emphasized that as job vacancies have significantly decreased from their peak after the pandemic, the labor market is weakening. The continuous decline in resignation rates, recruitment rates, and the recent downward revisions to the employment reports for April and May also indicate a slowdown in the labor market.

Berezin said, "Two years ago, unemployed workers could easily find new jobs by crossing the street. This has become increasingly difficult."

The June employment report showed that the unemployment rate rose from 4.0% to 4.1%, another sign of mild weakness in the job market.

Berezin stated that the rise in the unemployment rate could eventually lead to consumers reducing spending to accumulate "precautionary savings," which will occur as consumers' borrowing capacity weakens due to rising delinquency rates.

Ultimately, a negative feedback loop will develop in the broader economy, leading to market turmoil.

Berezin explained, "Due to the limited accumulated savings and increasingly restricted credit supply, many households will have no choice but to curb spending. Reduced spending will lead to job cuts. Rising unemployment will suppress income growth, leading to reduced spending and even higher unemployment rates."

Perhaps most importantly, the Federal Reserve's plan to suppress any economic recession through interest rate cuts will simply not work.

Berezin said, "It is important to realize that what matters to the economy is not the federal funds rate itself, but the actual rates paid by households and businesses."

For example, the average mortgage rate paid by consumers is around 4%, while the current mortgage rate is around 7%.

This means that even if the Federal Reserve cuts interest rates and mortgage rates decrease, the average mortgage rate paid by consumers will continue to rise.

This also applies to businesses and their loans that they hope to refinance in the coming years.

"These dynamics will trigger more defaults, causing pain to the banking system. The problems that affected regional banks last year have not disappeared," Berezin said