A sustained 10% decline in U.S. equities could significantly weaken consumer spending and raise recession risks, according to BCA Research strategist Peter Berezin. With U.S. households holding roughly $70 trillion in equity wealth, such a market drop would erase about $7 trillion in value and potentially reduce aggregate demand by around $280 billion, or roughly 0.9% of GDP.

Berezin's warning comes amid mixed economic signals. While fourth-quarter U.S. GDP growth slowed to 1.4%, below expectations, real private final domestic demand rose a solid 2.4%, suggesting underlying activity remains resilient. The strategist estimates that every $1 change in equity wealth translates into a 4-cent shift in consumption, making the wealth effect a critical factor for economic growth.

Despite lowering its 12-month U.S. recession probability to 30% from 50%, citing potential stimulus from tariff refunds and rising tax rebates, BCA remains concerned about overinvestment in artificial intelligence infrastructure. Berezin warns that heavy capital spending echoes the telecom investment boom that preceded the 2001 downturn, with hyperscalers projected to hold around $2 trillion in AI-related assets by 2030.