Top Wall Street analyst says U.S. economy is heading for a downturn as stocks fall due to concerns over Trump's trade war with China
- Morgan Stanley equity strategist says 2019 could be rough year for economy
- Indicators suggest drop in manufacturing and 'slowdown' in services sector
- Stocks fell on Wall Street on Tuesday due to concerns over trade dispute
Morgan Stanley, one of the top investment firms on Wall Street, is predicting a downturn in the American economy because of ongoing trade disputes and poor market indicators.
The bank issued a report on Tuesday warning that corporate profits and economic growth are at risk.
‘Recent data points suggest U.S. earnings and economic risk is greater than most investors may think,’ wrote Michael Wilson, the chief equity strategist at Morgan Stanley.
Wilson, who cited a recent survey by financial data firm IHS Markit, says that manufacturing activity dropped to a 9-year low in May.
He also writes that there was a ‘notable slowdown’ in the American services sector, which makes up the bulk of the domestic economy.
Morgan Stanley, one of the top investment firms on Wall Street, is predicting a downturn in the American economy because of ongoing trade disputes and poor market indicators. Morgan Stanley headquarters is seen above in New York City's Times Square
Wilson’s findings are based on information that was reported in April, ‘which means it weakened before the re-escalation of trade tensions [with China].’
‘In addition, numerous leading companies may be starting to throw in the towel on the second half rebound - something we have been expecting but we believe many investors are not.’
According to CNBC, Wilson is considered one of the most accurate strategists on Wall Street.
He correctly predicted that the S&P500 index would reach 2,750 by the end of 2018.
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That is why his predictions of a ‘rolling bear market’ for 2019 have Wall Street investors concerned.
U.S. stocks closed lower on Tuesday, with initial gains giving way to declines as the likelihood of a prolonged trade war between the United States and China once again kept risk appetite in check.
President Trump on Monday said he was ‘not yet ready’ to make a deal with China, although he expected one could be reached in the future.
An expanding tariff battle between the two sides has raised concerns the trade war would lead to a global economic slowdown.
U.S. stocks closed lower on Tuesday, with initial gains giving way to declines as the likelihood of a prolonged trade war between the United States and China once again kept risk appetite in check
‘The market holds up well, but then the weak hands take over late in the day,’ said Ryan Detrick, senior market strategist at LPL Financial in Charlotte, North Carolina.
‘Pick a worry and it continues to grow and manifest, whether it be trade or looking into consumer confidence, thinking maybe those people did the survey before the China stuff hit the fan. Clearly it’s all about trade.’
Consumer confidence jumped in May as households grew more upbeat about the labor market, although economists said the strong readings likely did not fully capture the impact of the trade standoff between Washington and Beijing.
The uncertainty has pushed investors toward safe-haven assets, which resulted in benchmark 10-year U.S. Treasury yields dropping to their lowest since October 2017, while the spread between the 10-year and 3-month bills narrowed to nearly a 12-year low.
The majority of the 11 S&P sectors were in the red, with only communication services on the plus side.
The Dow Jones Industrial Average fell 237.32 points, or 0.93%, to 25,348.37, the S&P 500 lost 23.91 points, or 0.85%, to 2,802.15 and the Nasdaq Composite dropped 29.66 points, or 0.39%, to 7,607.35.
