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Morgan Stanley Warns Of Imminent Recession From Trade War, While Credit Suisse Sees Fed Cut Next Month

"Act accordingly".

"Act accordingly".
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3 comments on “Morgan Stanley Warns Of Imminent Recession From Trade War, While Credit Suisse Sees Fed Cut Next Month

  1. Anonymous

    TRumps statement that US farmers and companies are willing to suffer to ensure his tariff policy works, sounds a bit like they’re happy to support the equivalent of the draft.

  2. I think I’m starting to feel sorry for Powell here. It now looks like there will be no quick resolution with China. But the situation with Mexico could change at any moment. Powell has already started complaining about corporations in the US taking on too much debt. If he cuts rates, Trump might remove the tariffs with Mexico the next day. If he restores rates in response, the Fed looks unstable. I would think he will feel safer waiting for the tariffs to take effect, and seeing that they are having some impact upon the economy. He may be criticized for waiting too long. But he didn’t create the trade mess, and monetary policy isn’t necessarily well designed to solve the impact of higher import costs. If you run a business in the US and your problem is expensive imports from China or Mexico, are you going to build a factory in the US? Or are you going to try to source materials from one of 80 other nations that might fly under the radar in the trade wars? And how long do you have to believe the tariffs will stay in place before you make heavy capital expenditures somewhere else? Cuts should still help stimulate demand and might prop up housing prices, but I’m not sure they are a panacea for trade wars, let alone growing corporate profits needed to maintain equity valuations.

    • You actually reminded me of the too much Corp debt issue and I think that will have a greater impact that the market is expecting. Powell May resist cutting rates too early for fear it will fuel further debt accumulation into unproductive assets and buybacks driving up equity multiples.

      I think it’s gonna be a pretty bad setup if we get out of this cycle without purging those unproductive assets from the economy.

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