MW The S&P 500 is approaching a Wile E. Coyote moment, says Wall Street's biggest bear

By Barbara Kollmeyer

BCA's Peter Berezin does not trust the rally

Not everyone is impressed with S&P 500 highs lately, as Wall Street's most bearish strategist warns that the stock market is headed for losses that investors aren't counting on.

"A familiar scene in the Road Runner cartoon involves the hapless coyote running off a cliff, pausing in mid-air, and then nervously looking down before plunging to the ground (miraculously, he always survives!)," a BCA Research team, led by chief strategist Peter Berezin, wrote in a note to clients that published on Monday.

"Our MacroQuant model is flagging the risk of such a Wile E. Coyote moment for the S&P 500," they wrote.

As Berezin and his team explained, BCA's Stock Coach model indicates the U.S. equity z-score - how far performance deviates from the average - is currently just above the "dreaded" -1 threshold at -0.72. They said that number is "consistent with below-average returns on the S&P 500 over the next 1-to-3 months. A move below -1 would intensify our angst about the direction of the stock market."

BCA's current recommendation is an underweight on U.S. stocks - in other words, less exposure. Headed into 2025, Berezin had forecast a 4,450 year-end finish for the S&P 500, and in early April said he wouldn't be a buyer unless the index dipped below 4,200. Berezin currently holds the most bearish target for the index across Wall Street strategists.

The S&P 500 has logged two fresh record highs in the last two sessions, along with the Nasdaq Composite Index COMP, but stocks were mostly weaker in early action on Tuesday.

Berezin and his team said their equity model has shifted from worries about frothy sentiment and positioning on stocks to concerns over the U.S. economic outlook. He and his team cited weakness in consumer spending, the housing market and payrolls data that looks fine on release day, only to be revised lower in the following months.

"To become more confident on the stock market, I would need to become more confident on the economy. Right now, the data does not give me much comfort," Berezin told MarketWatch in emailed comments, flagging the above data worries.

"This week's jobs numbers will be pivotal. If we get much weaker labor market data for June, the whole recession narrative will come screeching back, causing stocks to tank and bonds to rally," he said of Thursday's payrolls data, which moved up a day due to the Independence Day holiday. Economists are forecasting a media jobs gain of 110,000 for June, from 139,000 the prior month.

As well as the economic backdrop, tariffs that likely aren't going away and supersize budget deficits to come from President Donald Trump's tax and spending bill grinding its way through the Senate are other negatives BCA sees for investors.

As for sectors, BCA's MacroQuant equity model prefers materials, consumer staples, energy, utilities, industrials, communications services and healthcare. The model is underweight on financials and information technology, with a more negative bias toward consumer discretionary. Canada, emerging markets, Australia, the euro area and the U.K. are considered overweight equity regions, with Japan neutral.

Read: Why out-of-favor Apple holds the key to tech stocks in the coming weeks

-Barbara Kollmeyer

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July 01, 2025 10:12 ET (14:12 GMT)

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