Investors bracing for a potential recession may want to prepare for a sharp decline in the stock market. According to Bank of America, strategists expect the S&P 500 to drop to as low as 5,000 if unemployment rises and the economy tips into a downturn.
The benchmark index could fall another 12% from its current levels, but Bank of America’s base case is for stocks to end the year higher. The bank forecasts the S&P 500 trading between 5,885 and 6,175, implying an upside of up to 7%.
A recession is a growing concern among Wall Street forecasters. Fears of a downturn have increased as markets digest weakening economic data and consider the impact of tariffs.
Recent analysis shows that median market-implied recession odds across 20 asset classes and sectors have climbed to 33%, up from 0% in November. GDP growth is expected to shrink 1.8% this quarter, according to the Atlanta Fed GDPNow reading.
Investors are advised to reduce overall portfolio risk until more clarity emerges on the path ahead. This may involve increasing defensive sector exposure in equity portfolios while overweighting fixed income relative to stocks.
Source: https://www.businessinsider.com/stock-market-recession-outlook-sp500-correction-prediction-economy-slowdown-bofa-2025-3