Next year: Wall Street Banks Warn Investors About Rising Recession Risks

Wall Street's largest banks are warning investors about growing recession risks due to the escalating trade war between the US and China.

Фото: Depositphotos

According to Morgan Stanley, the global recession could begin within nine months if President Donald Trump imposes 25% tariffs on an additional $ 300 billion in Chinese exports and because of Beijing's retaliation. In addition, JPMorgan Chase & Co. said that the likelihood of a recession in the US in the second half of this year has increased from 25% to 40%.

“Recent talks with investors have reinforced the perception that markets are underestimating the impact of the trade war,” Morgan Stanley chief economist Chetan Ahya wrote in the report.

“Investors are generally of the view that the trade dispute could drag on longer, but they appear to be overlooking its potential impact on the global macroeconomic outlook,” he adds.

On the subject: Walmart promises to raise prices due to new duties against China

Such warnings can set the tone for financial markets and will inform financial group leaders in Japan this week. The potential for an obvious slowdown in the global economy was highlighted on Monday by weakening production in Asia.

The yield of government bonds fell this year as investors moved to the price amid slowing economic growth and weakening the central bank. Strategists at JPMorgan and Citigroup Inc. predict the possibility for even lower returns.

“Global growth appears to remain below trend for the rest of this year,” JPMorgan chief economist Bruce Kasman and his colleagues wrote in the report.

Economists from Goldman Sachs Group Inc. also said they now expect the US to introduce 10-percent tariffs on the remaining 300 billions of dollars in imports from China and all Mexican goods. The bank lowered its growth forecast in the second half of the United States by about half a percentage point to 2% and stated that it sees a greater likelihood of lower interest rates from the Federal Reserve.

On the subject: How will the US trade war with China

“While this is a challenge, the outlook has not yet changed enough for cuts to become our baseline forecast,” Goldman analysts led by chief economist Jan Hatzius said in a note.

Disagreements between the Trump administration and China have intensified, as each side blames the other for disrupting negotiations. The trade war is also gaining a global dimension amid growing tensions between the United States and the European Union, while Trump is threatening to introduce tariffs on Mexican goods in response to illegal immigration.

Citigroup analysts recommended that investors buy US Treasury bonds, noting that the last time the global economy looked like it was at the beginning of 2016 of the year, followed by a significant worldwide decline.

“This episode could serve as a useful blueprint for the coming months,” said Mark Schofield, director of macro strategy at Citigroup.

• Recall, US President Donald Trump announced that From 10 May Fees for products imported from China for a total amount of 200 billions of dollars will be increased from 10 to 25 percent.
• China announced that in response to the “unilateral actions and protectionism of the United States” from June import duties from the USA will be increased on 60 billion dollars. In total, the duties will apply to 5140 types of goods, of which the duties for 2493 types of goods will be increased to 25 percent, and the rest - from 5 to 20 percent.
• In 2018, Trump introduced a series of import duties and started a trade war, citing the imbalance in trade between countries. According to the 2017 year, the United States delivered goods to China for almost 130 billion dollars, and China in the US for 505,5 billions, a negative trade balance amounted to 375,5 billions.
• The US authorities are also blaming China for systemic theft of technology, which uses legal mechanisms. By law, foreign companies are required to open joint ventures with local partners to access the Chinese market. Having gained access to foreign technological know-how, Chinese manufacturers allegedly copy them in order to finally open their own production.

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