The Dow Jones Industrial Average continues to slaughter all challengers, swatting away trade war concerns, recession alarms, and Trump administration turmoil as if they were flies on a window.

However, Deutsche Bank warns that one key index component threatens to cripple the stock market bellwether as it seeks to ascend to new all-time highs.

Deutsche Bank Sounds the Alarm on Caterpillar

On Wednesday Deutsche analyst Chad Dillard downgraded Caterpillar shares from Buy to Neutral. He also slashed his CAT price target to $128, predicting that the stock would plunge 9 percent from its present value of $140.11.

According to Barron’s, Dillard turned bearish on Caterpillar due to mounting concerns that a global recession lays just over the horizon.

As CCN.com reported, the International Monetary Fund, World Bank, and Organization for Economic Cooperation and Development have all lowered their growth forecasts for 2019. The US Federal Reserve also committed to holding interest rates steady through the new year, indicating that the Fed believes the heated US economy is cooling off. Furthermore, Wall Street bears continue to sound the alarm on China, whose GDP growth rate has careened lower over the past decade.

“The world is cautiously optimistic — hoping for the best, but preparing for the worst,” Jay Pestrichelli, founder and chief executive of ZEGA Financial, told Bloomberg in a recent interview.

Dillard: CAT Could Careen 40% Below 2018 Peak

Noting that industrial stocks underperform in economic downturns, Dillard warned Deutsche Bank clients that the economy has already hit its cyclical peak. He explained that this slowdown has already begun to manifest in Caterpillar sales figures.

“Negative backlog growth historically precedes a negative earnings revision cycle,” he warned.

Judging by historical trends, Caterpillar stock could crash as far as 40 percent from its cyclical peak. Based on CAT’s 52-week high of $161, that pullback would see the stock careen below $100 to $96.6, representing a roughly 31 percent haircut from their present level.

Dow Faces Worrisome Headwinds from Caterpillar & Boeing

There’s also the looming threat of the seemingly never-ending US-China trade war, whose associated tariffs disproportionately impact Caterpillar and hike its manufacturing costs.

Optimism remains high that the US and China will strike a trade deal sooner rather than later, but critics warn that any more near-term hiccups could prolong the negotiations as far out as June – a full three months after President Trump’s original deadline.

Caterpillar is the 10th most heavily-weighted stock in the Dow 30, accounting for 3.63 percent of the index. Given that the Dow’s largest component – Boeing – is already under severe pressure from other factors, the index could face considerable headwinds if Dillard’s ominous prediction proves correct.