5 black swan events that could surprise the market this year

• There are five surprise events that could shake the market in 2025, according to BCA Research.
• The firm speculated on a handful of unlikely-but-plausible black swan events that could happen this year.
• BCA has stuck to its recession call, predicting that stocks could tank 26% in 2025.

There are a handful of surprises that could spark a seismic shift in markets this year, according to BCA Research.

In a recent note to clients, the Wall Street research firm speculated on five potential black swan events — defined as disruptive events that are unlikely, but plausible, and could spark a big swing in stocks, typically to the downside.

"We do not count on any of these things happening, but they could happen and in all cases the macroeconomic and/or financial implications would be huge," the firm's strategists wrote.

BCA is among the most bearish firms on Wall Street. In a previous note, the firm doubled down on its recession call and predicted stocks could plummet as much as 26% this year, despite most forecasters expecting another positive year for the market.

Here are five events the firm thinks could surprise investors in 2025:

1. China begins to reverse its economic policies.

China could suddenly change its approach to policy and do whatever it can to rev up growth in its economy, BCA speculated. In that scenario, a "monster rally" could take place in China's domestic and offshore stock markets, surprising investors.

The firm gave examples of several policy changes that could change the narrative in the market.

For one, China could pump its economy with large amounts of stimulus, potentially raising inflation, lowering interest rates, and fueling growth.

For another, China could adopt more pro-business policies, such as reaching out to private businesses to encourage risk-taking and opening up its markets to foreign competition. The latter could raise the value of the yuan and help reduce China's trade surplus.

Beijing could also begin negotiations to revive trade with the US, which would likely prevent Trump from escalating his plan to levy steep tariffs against the nation, the firm added.

2. Trump finalizes a nuclear deal with Iran.

Trump could lock down a new nuclear deal with Iran after withdrawing from the deal during his first term as president. The deal could cause oil prices to decline, easing jitters that tensions with Iran will dent the world's supply of oil.

The deal could also ease fears of military conflict between the US and Iran. There's a 75% probability of military escalation between the two nations occurring in 2025, BCA estimated.

"So a black swan would consist on Trump's team … negotiating a deal with Iran to freeze its nuclear program and thus prevent full-scale war," strategists added.

3. Trump could turn his back on NATO.

Trump could end up turning away from the North Atlantic Treaty Organization, the military alliance created to prevent the former Soviet Union powers from expanding into Europe after World War II.

Trump floated pulling the US out of NATO during his first-term as president. In his second term, Trump may refuse to take action if a member of the alliance was under attack or make comments that would "vitiate trust in the alliance," BCA speculated.

If Russia were to stage military action against an Eastern European nation and the US wavers on its commitment to NATO, the situation could create a "negative shock" for Eastern European currencies and assets, the firm said.

In particular, the euro could decline, and Eastern Europe could see a "permanently higher risk premium" for Eastern European currencies and assets, strategists added, implying higher interest rates.

4. The US could use military or economic force against Mexico.

The US could use military force on the US-Mexico border to push back against illegal activities, like drug trafficking. That move could spark an "unexpected crisis" in the US, BCA warned.

"If that happens, the US would violate Mexico's sovereignty and cause civilian deaths. The cartels could also seek to retaliate within the US proper, causing a rippling security crisis," the firm said.

Economic tensions could also break out between the two nations, with both countries potentially levying steep tariffs on the other. Given the US's exposure to Mexico, that could result in "significant price rises," the firm said.

"The bad news is that serious tariffs could really be enacted for a while and the security situation could deteriorate in both countries," strategists added.

5. Other nations could stage a coordinated currency intervention.

Other nations may agree to organize a foreign exchange intervention in response to Trump's tariff threats, which could result in a sharp decline in the US dollar, BCA suggested.

If Trump ends up levying steep tariffs on US imports from other countries, nations would be favorable to devaluing the dollar, which increases the purchasing power of their own currencies.

"Trump's faction would prefer to use political and strategic pressure to encourage other countries to pay the price of the macro adjustment, by appreciating their currencies or adopting policies that increase US imports," the firm wrote. "The implication would be hugely negative for the greenback this year," they later added.