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BCA STILL SEES RECESSION COMING, BUT COULD TAKE LONGER

BCA Research has been among the most bearish forecasters on the U.S. economy and stock market, but chief global strategist Peter Berezin says that so far they have not moved into a fully defensive stance as they haven’t yet seen the “whites of the recession’s eyes.”

Berezin notes that the risk of an out-of-control trade war has faded and “the bite” from higher consumer prices as U.S. President Donald Trump enacts tariffs on trading partners has not yet materialized.

BCA says that the impact on the economy of corporate investment in artificial intelligence is overstated, with much of the spending going towards Nvidia chips and other semiconductor equipment, most of which is not produced in the United States.

On the positive side, however, the economy may be aided by the bonus depreciation allowance in One Big Beautiful Bill Act, which should incentivize additional capital spending. This is unlikely to offset the drag from higher tariffs, but along with easier financial conditions “it could keep the US economy afloat for a while longer.”

As a result, Berezin says the firm is moving to “a somewhat more agnostic view on our US recession call,” but still sees a more than 50% chance of a recession in the coming 12 months.

BCA’s MacroQuant U.S. equity model is signaling flat to slightly down stock returns over the next few months, “in other words, a period of consolidation rather than a bear market.” The model further sees upside risk to U.S. Treasury yields in the near term and has turned less bearish on the U.S. dollar.

(Karen Brettell)

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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)