Morgan Stanley Warns Of Recession, Says Fed Rate Cut Might Be Too Late
2019-07-23 14:12

Any interest rate cut by the U.S. Federal Reserve, including the one widely expected next week, won’t save the U.S. economy from a recession over the next year, warns Morgan Stanley.

摩根士丹利(Morgan Stanley)警告说,美国联邦储备委员会(fed,简称:美联储)的任何降息举措,包括外界普遍预期的下周的降息举措,都不会在明年将美国经济从衰退中拯救出来。

The next recession will start as a demand shock, according to Ellen Zentner, Morgan Stanley chief U.S. economist. Zentner said the current “credible bear case” probability is about 20 percent, but that might change quickly depending on the track ongoing trade tensions with China take.

摩根士丹利(Morgan Stanley)首席美国经济学家曾恩纳(Ellen Zentner)说,下一次衰退将从需求冲击开始。Zentner称,目前"可信空头"的可能性约为20%,但这可能很快改变,取决于目前与中国贸易紧张局势的走向。

“For now, the path to the bear case of a U.S. recession is still narrow, but not unrealistic,” said a report from Zentner and her team.


They said reliable yardsticks of an impending recession are nonfarm payrolls, consumer strength, manufacturing and aggregate indicators of growth such as those the Conference Board publishes.

他们说,衡量即将到来的经济衰退的可靠标准是非农就业人数、消费者实力、制造业以及世界大型企业联合会(Conference Board)等经济增长的综合指标。

As a whole, data confirming a recession are “just outside the danger zone,” wrote Zentner. But “these series can deteriorate rapidly, and a continuation of current deceleration trends through the summer would materially increase the risk of recession.”


At the heart of the recession case being made by Morgan Stanley are the intractable trade tensions between the United States and China that stand to trigger layoffs and a deceleration in consumer spending.


“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,” wrote Zentner.


“Corporates may start laying off workers and cutting capex as margins are hit further and uncertainty rises.”


Taken together, these events will amount to a “large demand shock.” This huge hit will slow U.S. economic growth to negative 0.1 percent in 2020 from a projected 2.2 percent expansion in 2019. Zentner described this slowdown as a shallow recession but one that is, nevertheless, a huge comedown for an economy that grew 2.9 percent in 2018.


There will also be a big hit to stocks. Morgan Stanley said investors will be better served investing in defensive sectors like healthcare and consumer staples. Based on past experience, fixed income tends to outperform as a safe haven during a recession.

股市也将受到重创。摩根士丹利(Morgan Stanley)表示,投资于医疗保健和消费必需品等防御性行业,将更好地服务于投资者。根据以往的经验,在经济衰退期间,固定收益产品作为避风港的表现往往强于其他产品。

On the other hand, motor vehicles and tech hardware are sectors most likely to underperform. Other sectors for investors to avoid include cyclical stocks and high-yield bonds.


Wall Street traders

Traders and financial professionals on the floor of the New York Stock Exchange (NYSE). Norway's sovereign wealth fund lost a ton of money at Wall Street and other equity markets in 2018. Photo: JOHANNES EISELE/AFP/Getty Images 

纽约证券交易所(NYSE)的交易员和金融专业人士。2018年,挪威主/权财富基金在华尔街和其他股市损失惨重。图:JOHANNES EISELE/法新社/盖蒂图片社

Investors should start becoming defensive now, says Morgan Stanley.

摩根士丹利(Morgan Stanley)表示,投资者现在应该开始采取守势。

“Since recessions do not announce themselves when they arrive and markets are forward-looking, history suggests that investors should not wait for confirmation of a recession before getting more defensive in their asset allocation,” wrote Zentner. “Patience does not pay when it comes to recessions."


Zentner said waiting until the National Bureau of Economic Research (NBER) actually pronounces the economy in recession is a good time to start buying because the market already will have started pricing a recovery.


She believes the upcoming Fed rate cut might be negated by increasing pressure from tariffs that could pull both the U.S. and global economy into recession.


More and more experts are now openly predicting a recession. The New York Fed estimates a 33 percent chance of a recession in the next 12 months, the highest level since the Great Recession of 2008.


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