LIVE MARKETS-BCA Research sees US labor weakness driving more stock downgrades in 2026
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BCA RESEARCH SEES US LABOR WEAKNESS DRIVING MORE STOCK DOWNGRADES IN 2026
BCA Research strategists expect weakening U.S. labor demand and rising unemployment to lead to more downgrades than upgrades for stocks in 2026.
"Tepid labor market conditions may morph into a sharp and self reinforcing rise in unemployment, driven by the fear among consumers that they may lose their jobs," said BCA strategists in a note dated November 24.
Labor data earlier this month showed the U.S. unemployment rate rose in September even as employers added more jobs than economists had estimated.
The current K-shaped economy in the U.S. -wherein labor conditions continue to deteriorate alongside strong corporate investments and resilient spending by affluent households- could serve as a short-term balance, yet it falls short as a long-term fix, the brokerage said.
While the imposition of U.S. President Donald Trump's import tariffs have not resulted in a recession in 2025, it has weighed on labor demand, BCA said in the note.
Trump's immigration policies and the U.S. Federal Reserve's monetary policy stance have also contributed to pressure on the labor market.
They see 2026 as a "revelatory year".
"It will clarify whether weakening US labor demand tips the economy into recession, and whether the AI boom will continue to boost economic growth and corporate earnings."
(Kanchana Chakravarty)
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