Displaying items by tag: recession

(New York)

It was uncertain for a while, and still is, but markets are increasingly expecting the Fed to cut rates again this month. Investors now put around a 75% chance that the Fed will slash rates by another 25 bp this month. The interesting thing is at the beginning of this week, the market’s odds were under 40%. However, the release of weak manufacturing data a few days ago sent expectations surging that the Fed would once again step in.

FINSUM: New jobs report data out today will only bolster the case for further rate cuts.

(New York)

The Dow is oversold. That is what at least one Wall Street analyst (and Barron’s) is saying. The manufacturing report this week made recession worries flare up in a big way, leading to a sharp sell-off. However, it may only be a matter of time until the Fed’s more accommodative policy starts rippling through the economy with positive benefits. This is arguably already being seen in the housing market, where new and existing home sales were up sharply in August.

FINSUM: The market may be poised for a nice rebound if economic figures start to improve, as prices are currently being held back by recession fears.

(New York)

Wall Street research teams have been pretty split in their market outlooks recently. While the general mood is always bullish in equity research, an inordinate number of banks have been pessimistic lately. Do not count Morgan Stanley in that group, as they have just come out with what cannot be considered anything other than a bullish note given the current environment. The bank says there is only an 11.4% chance of a recession in the next year. Morgan Stanley also pointed out that each asset class has its own positioning right now, saying “Rates are generally pricing in a higher risk of recession than equities, giving equities greater relative downside should a recession emerge and bonds greater relative downside should economic growth begin to trough/reaccelerate”.

FINSUM: As Morgan Stanley also added in this piece, the real time to worry is if companies start cutting jobs to maintain margins. Once that happens, consumer spending and sentiment will fall rapidly.

(New York)

The world’s biggest family offices are feeling very bearish. A new study by UBS found that over half of them are expecting a recession and over 40% of them are increasing their cash reserves. 45% are taking steps to mitigate risk. Family offices have struggled in the last year, averaging only a ~5% return; much lower than the 9-13% returns they typically target.

FINSUM: Normally speaking we might think this is a good counter-indicator, but family offices represent so much AUM that they could have a real impact on the market.

(New York)

While a lot of sentiment is starting to look more positive, Deutsche Bank has just come out with the exact opposite opinion. The bank has gone on the record warning that a recession will arrive very shortly, and that stock prices should be at least 13% lower than they are. The bank’s chief global strategist said, “We are cautious on stocks. We would argue you want to be defensively positioned [and] we would argue that the U.S. equity market has run way, way ahead of growth”. He continued “Every time payrolls growth has gone below 1%, the U.S. has ended up in recession. We would argue the U.S. economy is dangerously close to...tipping into recession”. US jobs growth is currently at 1.3% and slowing.

FINSUM: This is a really bearish outlook from an investment bank, which tend to trend towards over-bullishness. We question the valuation argument, but this is certainly a view worth noting.