Morgan Stanley sees ‘credible bear case’ for a US recession

via CNBC:

  • Morgan Stanley economists see a 20% chance of a recession in the year ahead, but that could move up quickly depending on circumstances.

  • Trade tensions that could lead to layoffs and a pullback from consumers are at the center of the recession case laid out by Ellen Zentner, Morgan Stanley’s chief U.S. economist.

  • A Fed rate cut may not be enough to stave off a slowdown that would start as a demand shock, according to the forecast.

Interest rate cuts might come too late to save an economy that is dangerously close to slipping into recession, according to Morgan Stanley economists.

“For now, the path to the bear case of a U.S. recession is still narrow, but not unrealistic,” a team led by the firm’s chief U.S. economist, Ellen Zentner, told Morgan Stanley clients in a lengthy analysis that spells out the likelihood of negative growth within the next 12 months and what investors should do if that comes to pass.

Trade tensions that could lead to layoffs and a pullback from consumers are at the center of the recession case. Zentner said the current “credible bear case” probability is about 20%, but that could change quickly.

“If trade tensions escalate further, our economists see the direct impact of tariffs interacting with the indirect effects of tighter financial conditions and other spillovers, potentially leading consumers to retrench,” she wrote. “Corporates may start laying off workers and cutting capex as margins are hit further and uncertainty rises.”

 

I wonder how many bank warnings we will get before the recession. Last time it wasnt a lot. This time seems to be more

 

h/t mr. jingles