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Yahoo
6 days ago
- Business
- Yahoo
This is the surest way for the U.S. to reshape the domestic and global economy
-- The most effective strategy for reshaping the U.S. and global economy is a combination of higher taxes and lower government spending, according to BCA Research in a note Friday. The firm said that despite occasional rhetoric from President Donald Trump about raising taxes on high-income earners, the path to meaningful fiscal reform remains politically blocked. 'The surest way for the U.S. to restructure the domestic and global economy is to raise taxes as well as cut spending,' BCA analysts wrote. However, they note that 'Republicans lack the votes to pass tax hikes,' making significant fiscal tightening unlikely. BCA noted that Trump has suggested he 'would support a tax hike on the highest income earners.' Still, political reality makes such measures difficult to enact, and his broader fiscal strategy is unlikely to reverse deficit expansion. Trump's 'signature law will maintain large budget deficits of around 7%-8% of GDP,' BCA said. The think tank predicts that while tariffs could produce a short-term 'fiscal drag of 1% of GDP,' the following year could see a 'fiscal thrust in 2026 [that] would reach as high as 1.7% of GDP.' While the near-term economic outlook includes headwinds from 'higher tariffs and bond yields,' BCA expects that a version of Trump's fiscal package 'is guaranteed to pass, – but higher bond yields and inflation will weigh on the economy and stock market.' In short, BCA concludes that while Trump's fiscal policy is 'surprising to the upside with budget deficits,' it may ultimately generate economic friction rather than structural reform. Related articles This is the surest way for the U.S. to reshape the domestic and global economy Canada's March retail sales beat expectations on auto sector Decline in foreign demand for U.S. corporate debt likely to continue - Citi Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
18-05-2025
- Business
- Yahoo
This geopolitical strategist says Putin is likely to take a ceasefire in Ukraine
- Russian President Vladimir Putin is likely to accept a ceasefire with Ukraine as the Kremlin eyes pressures from declining oil prices, according to analysts at BCA Research. Earlier this week, Putin skipped face-to-face negotiations with Kyiv to end the conflict, despite having proposed the first meeting between the countries since the opening weeks of the conflict in 2022. Instead, the Russian leader sent a delegation of aides and deputy ministers to the discussions in Turkey, a group that Ukrainian counterpart Volodymyr Zelenskiy described as "decorative". Russia, in response, said that its team was ready to seriously work with Kyiv, but accused Ukraine of attempting to "put on a show" around the talks. Hopes for progress on a possible peace agreement subsequently faded, and were further dented after U.S. President Donald Trump suggested to reporters that "nothing's going to happen until Putin and I get together". Trump, however, has been keen to bring an end to the hostilities, which he has called a "stupid war". Despite Trump's insistence on a swift peace, only about half of observers on either side of the conflict are expecting a ceasefire, the BCA Research analysts noted. Still, they anticipated that pause in the fighting seems the "likeliest outcome based on Russia's national interests". The Russian economy is in a weak position, the analysts led by Matt Gertken argued, flagging the country's potential output is collapsing and the Kremlin's budget balance had swung to -2.3% from 0.8% as a share of gross domestic product between 2021 to 2024. Crucially, the strategists noted that around 29% of Russian revenues are derived from energy and commodity production, leaving the country vulnerable to a globa benchmark crude oil price that has fallen from $94 per barrel in February 2022 -- when the Ukraine conflict began -- to roughly $62 this month. Russia also faces a host of Western sanctions that have threatened to crimp economic activity, while the U.S. Senate has proposed slapping a 500% tariff on buyers of Russian oil. By accepting a ceasefire, Putin can turn from managing the fighting with Ukraine to the state of a faltering domestic economy that could imperil his grip on power, the BCA Research analysts argued. "Bottom line: Russia has strong incentives to sign a ceasefire with Ukraine," they wrote. Against this backdrop, European assets, which have been outperformers so far this year, "will continue to benefit", the analysts added. Given these expectations for a ceasefire and a rally in global cyclical stocks, the analysts said they will close their long positioning on aerospace and defense stocks. Related articles This geopolitical strategist says Putin is likely to take a ceasefire in Ukraine Everything you need to know: Trump comments on Iran, trade and Russia Carney swears in Cabinet, signals shift with new names and positions
Yahoo
16-05-2025
- Business
- Yahoo
What are the key similarities and differences between 2025 and 2000
-- The year 2025 is unfolding in a pattern that has dynamics similar to those of 2000, according to BCA Research, but with key distinctions that could reshape investment strategies. 'This year's plunge in tech stocks followed by the recent strong countertrend rally is eerily reminiscent of 2000,' BCA said, describing the market as experiencing '2025 = '2000 with some tweaks.'' Among the core similarities, BCA pointed to a concentrated market peak led by AI stocks in 2025, just as dot-coms led in 2000, and a sharp selloff triggered by global growth shocks. The firm explained that in 2000, the shock came from Japan's GDP contraction; in 2025, it was the U.S.'s de facto trade embargo on China. Both threats later softened, sparking a rally into the summer. They note that other parallels include persistently high U.S. inflation, a tight labor market where 'labour demand exceeded labour supply,' and deflation in the world's second-largest economy—China today, Japan then. However, key differences stand out. The AI bubble 'is much more geographically concentrated in the US' and less extreme in valuation than its dot-com predecessor. More critically, global debt is far higher now, increasing vulnerability to recession. BCA also noted that under 'President Trump 2.0,' U.S. Treasurys and the dollar no longer carry the same haven appeal. Looking ahead, BCA expects a summer rally to push the S&P 500 past 6,000 before tech resumes its decline. 'A U.S. recession is not imminent,' the firm said, but it 'could enter a mild recession in 2026 on the back of a 'negative wealth effect.'' Related articles What are the key similarities and differences between 2025 and 2000 Most Canadians say the old U.S. relationship is 'over,' Nanos finds - Bloomberg Canada's wholesale trade rises slightly in March, fueled by motor vehicles Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15-05-2025
- Business
- Yahoo
Why Wall Street's biggest bear still expects a recession and much lower stock prices
The new US-China trade thaw hasn't shaken Wall Street's biggest bear. "We continue to see a recession as our base case. Although tariffs have come down, the effective US tariff rate is still the highest since the 1930s. The US economy was also on a weaker footing than widely believed even before the trade war began," BCA Research chief strategist Peter Berezin warned in a new note. "Stocks are not pricing in much recession risk, which suggests that a cautious stance towards equities is warranted." Berezin gained attention for being the lone bear on Wall Street coming into 2025 and sporting the lowest price target on the S&P 500 (^GSPC) at 4,450. His bearish call on stocks has mostly been right, at least up to the recent rally after the market tanked post-"Liberation Day." And on the economy, US GDP contracted 0.3% in the first quarter. In 2022, Berezin also correctly called that there would be no US recession, despite most on the Street bracing for one. He's been an economist for more than 30 years, with stints at the International Monetary Fund (IMF), Goldman Sachs, and now BCA Research. In his latest note, Berezin did take his recession probability odds down to 60% from 75%. But he points to weakness in the labor market and consumer spending during a time of considerable tariff fears as key reasons for his economic concerns. "If existing tariff rates remain in place, they will reduce disposable income for the median US household by about 2%, with larger effects for lower-income families," Berezin explains. Listen: Why the tariff thaw isn't super bullish for stocks He reiterated a call for the S&P 500 to plunge 25% from current levels to end 2025 at 4,450, backed up by his cautious view on the US economy. "While not our base case, we would assign 30% odds to a major fiscal crisis this year — one that takes the 10-year Treasury yield north of 6%," Berezin added. This comes as the markets are moving back up and to the right. The US and China agreed on Monday to ratchet down the tariff war for 90 days as each economy begins to feel the pressure of bruising penalties. After a weekend of high-level meetings in Switzerland, the US will reduce "reciprocal" tariffs on goods from China to 10% from 125%. A separate 20% tariff imposed by Trump over what he says is China's role in the fentanyl trade will remain intact. China will cut its retaliatory tariffs on US goods to 10% from 125%. The S&P 500 reversed its losses on the year on Tuesday but gave back some gains on Wednesday. The tech-heavy Nasdaq Composite (^IXIC) entered a new bull market on Monday. The "Magnificent Seven" complex — Apple (AAPL), Microsoft (MSFT), Meta (META), Tesla (TSLA), Nvidia (NVDA), Amazon (AMZN), and Alphabet (GOOG) — are back leading the market higher in a clear show of renewed risk appetite. Watch: Charles Schwab's CEO has a message to new investors But to Berezin's point, the trade war with China is far from finished. "Well, I don't think it will ever quite be over, but what will be over are these tariffs up over 100%," billionaire businessman and longtime Trump confidant Wilbur Ross told me on Yahoo Finance's Opening Bid podcast (see video above). Ross added, "There's probably always a 20% or 25% chance of recession, and it's been many years since we had a real recession. COVID, you have to put to the side because that was not an economic recession — that had to do with the horrible epidemic. So it's been a long time, and we're therefore due for a recession at some point." Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15-05-2025
- Business
- Yahoo
Why Wall Street's biggest bear still expects a recession and much lower stock prices
The new US-China trade thaw hasn't shaken Wall Street's biggest bear. "We continue to see a recession as our base case. Although tariffs have come down, the effective US tariff rate is still the highest since the 1930s. The US economy was also on a weaker footing than widely believed even before the trade war began," BCA Research chief strategist Peter Berezin warned in a new note. "Stocks are not pricing in much recession risk, which suggests that a cautious stance towards equities is warranted." Berezin gained attention for being the lone bear on Wall Street coming into 2025 and sporting the lowest price target on the S&P 500 (^GSPC) at 4,450. His bearish call on stocks has mostly been right, at least up to the recent rally after the market tanked post-"Liberation Day." And on the economy, US GDP contracted 0.3% in the first quarter. In 2022, Berezin also correctly called that there would be no US recession, despite most on the Street bracing for one. He's been an economist for more than 30 years, with stints at the International Monetary Fund (IMF), Goldman Sachs, and now BCA Research. In his latest note, Berezin did take his recession probability odds down to 60% from 75%. But he points to weakness in the labor market and consumer spending during a time of considerable tariff fears as key reasons for his economic concerns. "If existing tariff rates remain in place, they will reduce disposable income for the median US household by about 2%, with larger effects for lower-income families," Berezin explains. Listen: Why the tariff thaw isn't super bullish for stocks He reiterated a call for the S&P 500 to plunge 25% from current levels to end 2025 at 4,450, backed up by his cautious view on the US economy. "While not our base case, we would assign 30% odds to a major fiscal crisis this year — one that takes the 10-year Treasury yield north of 6%," Berezin added. This comes as the markets are moving back up and to the right. The US and China agreed on Monday to ratchet down the tariff war for 90 days as each economy begins to feel the pressure of bruising penalties. After a weekend of high-level meetings in Switzerland, the US will reduce "reciprocal" tariffs on goods from China to 10% from 125%. A separate 20% tariff imposed by Trump over what he says is China's role in the fentanyl trade will remain intact. China will cut its retaliatory tariffs on US goods to 10% from 125%. The S&P 500 reversed its losses on the year on Tuesday but gave back some gains on Wednesday. The tech-heavy Nasdaq Composite (^IXIC) entered a new bull market on Monday. The "Magnificent Seven" complex — Apple (AAPL), Microsoft (MSFT), Meta (META), Tesla (TSLA), Nvidia (NVDA), Amazon (AMZN), and Alphabet (GOOG) — are back leading the market higher in a clear show of renewed risk appetite. Watch: Charles Schwab's CEO has a message to new investors But to Berezin's point, the trade war with China is far from finished. "Well, I don't think it will ever quite be over, but what will be over are these tariffs up over 100%," billionaire businessman and longtime Trump confidant Wilbur Ross told me on Yahoo Finance's Opening Bid podcast (see video above). Ross added, "There's probably always a 20% or 25% chance of recession, and it's been many years since we had a real recession. COVID, you have to put to the side because that was not an economic recession — that had to do with the horrible epidemic. So it's been a long time, and we're therefore due for a recession at some point." Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email
