Investing.com - A tariff-driven recession in the U.S. this year could lead to a global downturn and spark a worldwide equity bear market, according to analysts at BCA Research.
Concerns have risen in recent weeks that U.S. President Donald Trump’s policy plans, particularly his threats to implement widespread tariffs on friends and adversaries alike, may drive up inflationary pressures and weigh on economic activity.
The worries have taken their toll on investor sentiment, with the S&P 500 slipping by nearly 3% so far this year and briefly slumping into correction territory, typically defined as a 10% decline from a recent peak.
Consumer confidence surveys have pointed to a significant uptick in uncertainty around the outlook for both prices and employment, although Federal Reserve Chair Jerome Powell has said that the data may not have yet translated into actual spending behavior.
Still, downbeat guidance from retail giants like Walmart (NYSE:WMT) and Target (NYSE:TGT), as well as a host of other companies in sectors like logistics and travel, have suggested that "consumers’ actions are beginning to converge with their words," the analysts at BCA Research led by Doug Peta said.
According to LSEG I/B/E/S data cited by BCA Research, 24 of the first 26 retailers providing first quarter earnings guidance and 29 of the first 31 retailers offering first-quarter revenue guidance have lowered their estimates.
A drop in U.S. consumer spending activity would be problematic "when many other large economies contend with meager domestic demand," the analysts said. Against this backdrop, the chances that the U.S. could fall into a recession this year have risen, they added, noting that they would also expect to see "an outsized impact on earnings relative to macro conditions."
"[A] more severe bear market than economic conditions would warrant" could occur as well, the analysts argued, referring to when stock prices drop by 20% or more from recent highs.