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Deutsche Bank argued Monday that a recession in the U.S. has become more likely by mid-2023, citing market developments since early last spring.

The financial institution stated in a client note, “We see major stock markets plunging 25% from levels somewhat above today’s when the US recession hits, but then recovering fully by year-end 2023, assuming the recession lasts only several quarters.”

For Q1, the bank believes that the bear market rally should continue. Turning to Q2, markets should remain mostly flat to slightly lower as recession fears build.

The third quarter of 2023 is where Deutsche Bank sees recessionary factors kicking into gear. In this environment, the firm projected that markets will most likely be “down significantly,” with the S&P hitting 3250. As for Q4 of 2023, the firm sees a quick recovery, with the major averages bouncing back from the recession lows.

Additionally, the note stated: “We now see the S&P 500 ending 2022 at 4200; and in 2023: Q1 4500; Q2 4500; Q3 3250; and Q4 4500.”

On Monday, the S&P 500 (SP500) and its mirrored ETFs (NYSEARCA:SPY), (NYSEARCA:IVV), and (NYSEARCA:VOO) drifted lower as protests in China over COVID lockdowns brought some selling pressure to global equities.

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