The French bank BNP Paribas predicted the S&P 500 to drop 207 points — from 2937.78 to 2,730 — by the end of the year, according to Market Watch.
The bank, it its fourth-quarter outlook, cited the U.S.-China trade war as well as the possibility of auto tariffs in their analysis of the global economy.
Although news that U.S.-China trade talks will continue in October, after a call was described to have “went well” between China Vice Premier Liu He, U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer, BNP Paribas remains skeptical.
“Especially if exacerbated by additional downside shocks, the downturn could become nonlinear and morph into a fully-fledged global recession,” BNP Paribas said, expecting the global economy to further slow, in turn shifting the market focus from valuations to earnings.
“We expect increased dispersion of stock returns, with companies that have pricing power and low labor costs as a percentage of earnings likely to be more resilient. We view companies with higher balance sheet leverage and already-low margins as most at risk in a late-cycle environment,” they said.