Latest news with #Berezin
Business Insider
17-05-2025
- Business
- Business Insider
How a new tax bill could cause bond yields to spike and stoke a fresh bout of market chaos
Tariff chaos may have subsided, but markets could be in for another bout of policy-fueled volatility in the coming months if bond investors throw a tantrum over the tax bill. President Donald Trump's "Big, Beautiful Bill"—the 389-page tax bill that aims to extend Trump's 2017 tax cuts —could add around $4 trillion to the US deficit over the next decade, according to a projection from the Tax Foundation, a non-partisan think tank. While the bill stalled on Friday amid opposition from within the Republican party, it is likely that a tax bill will get done this year. For bond investors worried about the sustainability of government spending and the safe-haven status of US Treasurys, any fiscal moves that add to the deficit are bad news. So far, the bond market has been quiet. Yields are down this week as rate cut bets get repriced amid cooler inflation data. But that could change quickly as the tax bill gets closer to becoming law. Ed Yardeni, the president of Yardeni Research, predicted the yield on the 10-year US Treasury could spike as high as 5% as details of the tax bill get ironed out. A 5% yield is a key psychological threshold for the market and has sparked big sell-offs in stocks in recent years when that level has been reached. "I think they're watching with great interest how that's unfolding," Yardeni said of the bond market, speculating another Liberation Day-type sell-off could occur in government bonds if Republicans try to push the tax bill forward in its current form. Padhraic Garvey, the regional head of research for the Americas at ING, also said he saw yields edging back toward 5% as the tax bill gets closer to becoming law. He also pointed out that the US debt ceiling is set to increase around that time, which could fan more panic over government borrowing. "That'll be an interesting period where the bond market has got to decide, 'Well, do we like the smell of this?'" Garvey told BI, speculating that an "unnerving" sell-off in bonds was possible. "The Treasury market won't like it," he added of the current tax plan. Peter Berezin, the chief global strategist at BCA Research, estimated there's a 30% chance the bond market could see a "nightmare scenario," where the new tax bill prompts fears of fiscal crisis and sends the 10-year US yield soaring past 6%. In that situation, demand for US government debt securities would be so weak that the Fed would need to step up and buy Treasurys to help keep the government funded. "I will say that the risk of such an outcome is uncomfortably high," Berezin told BI, though he acknowledged that it wasn't his base case. "Unless Trump is willing to cut these entitlement programs for defense spending or raise taxes, none of which I think he'd be willing to do easily. We could see this crisis play out in a fairly significant way where yields go up quite a bit before the Fed can step in," Berezin said. Are the bond vigilantes really out there? The bond market got a lot of credit for staying Trump's hand during April's market meltdown over tariffs. Please help BI improve our Business, Tech, and Innovation coverage by sharing a bit about your role — it will help us tailor content that matters most to people like you. Continue By providing this information, you agree that Business Insider may use this data to improve your site experience and for targeted advertising. By continuing you agree that you accept the Terms of Service and Privacy Policy . Trump later denied the sharp rise in yields was behind his decision to pause most tariffs for 90 days on April 9, but he had admitted to at least watching the bond market as it reacted violently to the trade war. So, who are the bond vigilantes, and do these investors really have power over the president? To be clear, the $29 trillion market for US Treasurys is the largest in the world, and no one investor or even group of investors could easily move it. According to Yardeni, who is often credited with coining the term, bond vigilantes refers to the bond market itself, rather than specific investors who make it their mission to protest policies by selling bonds and spiking yields. Bond vigilantism is more of a description of the market's reaction to policies that could make Treasurys less safe, according to Yardeni. Right now, bond investors are concerned about two big macro forces: US debt. High levels of government borrowing raises doubts that the US will be able to meet its debt obligations, causing demand for US Treasurys to fall. Anything that worsens the outlook for the US deficit—like tax cuts—is on the radar of investors. Inflation. Higher inflation generally means higher interest rates in the economy. That means US debt is more expensive to service and also casts doubt on whether the US will be able to meet its debt responsibilities. In 2024, the government spent $881 billion on interest payments, according to the Congressional Budget Office. Trump has said that a goal is to lower interest rates for Americans during his term, and he's keeping close watch on the 10-year Treasury yield as a scorecard. Bond yields have been on a roller coaster this year already, climbing when he first unveiled tariffs on Mexico and Canada, and then rocketing higher after his "Liberation Day" announcement. Yardeni says he believes it's likely Trump will blink on some items in his tax bill to avoid another confrontation with bond market vigilantes. The president wants lower rates and needs bond auctions to go smoothly, as spotty demand for US Treasurys could easily spike rates to levels that could cause a recession, he said. "I think the administration will do what's possible politically to placate the bond vigilantes, but it won't be a guessing game. The news will come out about how this thing's progressing and what actually gets implemented, and the bond market will get to decide whether the right choices were made or not," Yardeni said. "The package that I see potentially getting passed is an attempt to make it not as dramatic as it could be," Garvey told BI on potential policy walk-backs.
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
Yahoo
28-04-2025
- Business
- Yahoo
Why the tariff relief stock rally isn't shaking Wall Street's biggest bear
Stocks may be in tariff relief rally mode, but Wall Street's biggest bear says investors should stay on high alert given the volatile backdrop. "President Trump's decision to walk back part of his tariff hikes has reduced the odds of a deep US recession. Nevertheless, stocks are not priced for even a mild recession, which suggests that the risk to equities is to the downside," BCA Research chief strategist Peter Berezin warned in a new note. Berezin gained attention for being the lone bear on Wall Street coming into 2025. Further, he correctly called in 2022 that there would be no US recession, despite most on the Street bracing for one. He has been an economist for more than 30 years, with stints at the International Monetary Fund (IMF), Goldman Sachs, and now BCA Research. There are several reasons Berezin is staying the course with his calls for a 75% chance of a US recession this year and S&P 500 (^GSPC) to finish at 4,450 (current level: 5,525). First, the current effective US tariff rate is still the highest since at least the 1930s, Berezin pointed out. The uncertainty around tariffs is beginning to cause companies to rein in capital expenditures, which could have ramifications for the job market. Read more: What Trump's tariffs mean for the economy and your wallet The uncertainty and potential tariff-related price hikes could also weigh on the spending decisions of US consumers. "We have these wired homes with the permission of consumers, we can track exactly what's happening in the laundry room, for example, how many loads are done per week, what temperature are those loads, etc.," Procter & Gamble (PG) CEO Jon Moeller told Yahoo Finance last week. "And what you see is a reduction in the number of loads that are done per week, currently going from about, if you go all the way back pre-COVID, about five loads per week to now about three and a half." The consumer staples giant cut its full-year sales and profit outlooks owing to economic concerns. Second, recent economic data studied by Berezin suggests that the US economy was softening before the trade war began. The Atlanta Fed GDP tracker pegs first quarter GDP as having dropped 0.4%. Goldman Sachs economists said GDP contracted 0.2% in the first quarter. Consumer sentiment indicators also began to weaken in March versus prior months. On stocks specifically, Berzin's analysis showed markets aren't pricing in a "meaningful deterioration in economic growth," let alone a "full blown" recession. The forward price-to-earnings (PE) multiple on the S&P 500 stands at 19.9 times, which is well below the level seen in past recessions. For example, during the March 2020 COVID-19 crisis, the S&P 500's PE multiple hit a low of 13.4 times. During the Great Financial Crisis, the S&P 500's PE multiple hit a low of 8.9 times in November 2008. "US stocks will under-perform on a multi-year horizon," Berezin wrote. The call from the closely followed strategist comes as stocks have rallied back on signs of the Trump administration being more open to tariff negotiations. Japan's Topix Index closed Monday at 2,650.61, just above the close on April 2 before Trump unveiled his tariff scheme. The S&P 500 has seen a four-day rally in spite of a spate of mixed earnings reports from the likes of household name companies, such as PepsiCo (PEP). The index is up 12% from its April 8 trough (but still down 10% from its peak). "We think there are two different (legitimate) perspectives at play on the consumer, which may be adding to investor confusion," RBC strategist Lori Calvasina wrote in a note on Monday. "We exited the week seeing managing tariff impacts as a work in progress, but with a greater appreciation of the work that has been done." Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email
Yahoo
11-04-2025
- Business
- Yahoo
Why Wall Street's biggest bear isn't budging on his calls after Trump tariff pause
It's going to take more than a reciprocal tariff pause to keep Wall Street's biggest bear from roaming the markets and heading into hibernation. "Based on my calculations, the tariff rate is still quite high — at least as high as anything we have seen since the 1930s. There is no guarantee these so-called reciprocal tariffs are going to come down. The fact of the matter is that most countries don't have very large trade barriers with the US," BCA Research chief strategist Peter Berezin tells me. Added Berezin, "The uncertainty is a problem —I think we are still headed into a recession, unfortunately." Berezin has told me recently he sees a 75% chance of a US recession this year and the S&P 500 dropping 15% to 4,450. He hasn't ruled out the US already being in a mild recession. Listen: Why Jamie Dimon may be wrong on a recession Berezin gained attention for being the lone bear on Wall Street coming into 2025. Further, he correctly called in 2022 there would be no US recession — despite most on the Street bracing for one. He has been an economist for more than 30 years, with stints at the International Monetary Fund (IMF), Goldman Sachs, and now BCA Research. The bearish calls on markets and the economy comes amid another turbulent weeks for stocks as some traders aimed to price in a recession while others took the more optimistic viewpoint. The Dow Jones Industrial Average (^DJI) on Thursday tanked 1,014.79 points or 2.5%. The S&P 500 (^GSPC) and Nasdaq Composite (^IXIC) sold off to the tune of 3.46% and 4.31%, respectively. Investor favorites in Nvidia (NVDA) and Tesla (TSLA) plunged 6% and 7.3%, respectively. Markets essentially dialed back their excitement after a historic day on Wednesday. The S&P 500 exploded 9.5% on Wednesday as President Trump announced a 90-day pause on reciprocal tariffs for most countries. He cranked up the pressure on China, however, taking tariffs up to 145%. The tech-heavy Nasdaq Composite surged 12% for its second-best day on record. The Dow Jones Industrial Average shot up 7.8%, or about 3,000 points. The about face on tariffs caused Goldman Sachs economists to reverse their baseline recession call ... made earlier that day. Stock futures were solidly in the red on Friday. Despite the elevated market volatility, some Wall Street strategists are aiming to search the rubble for buying opportunities. Most calls reviewed by Yahoo Finance focus on defensive stock tilts rather than buying recent dips on former high-flyers in Apple (AAPL), Nvidia, and Tesla. "This week's stunning reversals demonstrate how quickly things can change on both the policy/macro front and for equities. Given singular updates can determine risk-on vs. risk-off, we believe a balanced approach is warranted," said the Jefferies equity research team in a note today. "The current macro backdrop calls for a different tack than the classic cyclicals vs. defensives or straightforward factor-based approaches. With tariffs yet to be decided, significant estimate revisions may still be on the come, calling current multiples into question. Equally, given recent degrossing and better-than-feared macro data points, negotiation updates or policy u-turns can change sentiment quickly," the team explained. "As a result, we think investors are well-advised to allocate toward both companies with less direct exposure to tariffs & downward spiraling growth, as well as beaten-down shares resembling coiled springs." Top ideas include Coca-Cola (KO), McDonald's (MCD), Ralph Lauren (RL), Exxon (XOM), Netflix (NFLX), and Uber (UBER). Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email
