Morgan Stanley reveals mid-year recession, interest rate cut forecast

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This year was difficult.

After consecutive revenues by 20 % of 20 % for S&P 500 in 2023 and 2024, concerns about stagnation, stagnation and discussion of customs tariffs have increased the stock market.

After the S&P 500 reached the highest level in mid -February, it was an increasing concern that the slow economy would wander in sales and profits in addition to renewed fear of inflation due to the newly imposed definitions on the decline in measurement by 19 %, only shy of the bear market area.

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The sales process was so fast and very desperate that most shares became exaggerated, as Tinder provided a large relief gathering when president Donald Trump temporarily suspended many mutual definitions.

The index has since increased by almost 20 %, which has erased a lot of losses since February and raised them to public lions.

Regardless, fixed organic pollutants and seismic travel have affected the psyche of investors, and despite recent gains, economic concerns still exist.

The job market has weakened over the past year, economic activity has slowed, and the definitions are likely to remain in place, which presses inflation and may support the federal reserve in a corner.

The background has a lot in Wall Street, including Morgan Stanley, to update their expectations. The main investment company recently released an update in the middle of the time that includes economic goals and breaks the hopes of more discounts in interest rates in the field of federal reserves this year.

Investors were on a cylinder tournament this year with a discussion of a discussion on the health of the American economy. Angela Weiss & Sol; Gety Em.

Federal Reserve Chairman Jerome Powell earns his salary this year.

The double federal reserve is low inflation and unemployment, and often two competitors. This year, the tension of the two makes between the two to identify rates to encourage employment and inhibit inflation in particular.

Inflation has decreased significantly since its peak above 8 % in mid -2012. However, progress slowed and inflation remains higher than the Federal Reserve goal by 2 %. In April, the consumer price index showed inflation by 2.3 %, approximately levels of matching in September.

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At the same time, the labor market is not as strong as it was a year or two.

Unemployment of 4.2 % is historically low, but it increased from 3.4 % in 2023. At the same time, in 901,000 March, jobs were not shipped compared to a year before, according to the job opportunities agreement and work rotation, the work office report report. Also, workers’ layoffs are in rise, as more than 602,000 workers climb this year, an increase of 87 % over the previous year.

Crafts reflect a slowdown in general economic activity that negatively affects consumer confidence.

GDP in the first quarter contract is 0.3 %, much lower than 3 % growth last summer. Michigan’s consumer confidence survey decreased sharply to 50.8 in May, a decrease of 27 % from one year. Americans now expect inflation in the year by 7.3 %, an increase of 6.5 % last month.

The risk of more function and inflation losses due to the tariff, including a 30 % tariff on China, 25 % of the customs tariffs in Canada, Mexico and cars, and the 10 % basic line tariff, hands of the Federal Reserve.

If the rates are reduced, as expected extensively earlier this year, it risks the ventilation of inflationary fire. Raising prices may slow the inflation, but it may force us to stagnate.

Reading tea leaves is not easy this year, but this does not prevent Wall Street from trying.

Morgan Stanley, one of the largest investment banks, has recently released an average update of its expectations for discounts in the rate of interest in the federal reserve and the American economy. Expectations will not win many fans in the hope of decreasing mortgage rates or searching for new jobs.

The chief American economist Michael Gabin properly targeted a slower growth and more enlarged enlargement that enters in 2025. Now he says the 13 % effective tariff will remain, which presses the economy while avoiding stagnation.

Unfortunately, Gabin did not see any real help from the Federal Reserve this year. The Federal Reserve will delay the additional interest rate cuts “until 2026”.

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As for the gross domestic product, the goal of the growth of Morgan Stanley is Tebil.

According to a memorandum sent to customers, GAPEN expects “a real growth in 1 % GDP in 2025 and 2026 (Q4/Q4), with an increase in inflation in 3Q25, where this year ends between 3 % and 3.5 %, and the unemployment rate gradually increases to 4.8 % by the end of 2026.”

High unemployment and inflation higher than current levels are not necessarily good news for investors who hope to get growth and profit returns.

However, GAPEN says that the Federal Reserve will have to respond to the weakest economy next year, which reduces “more deep than the markets at the present time to a target range of 2.5 % -2.75 % federal funds by the end of 2026.” Currently, the federal funds are 4.25 % to 4.5 %.

In general, his outlook means that the position of American debt is getting worse.

He exposed the deficit to 7.1 % of GDP of 6.3 % in 2025, “an increase of $ 310 billion on an annual basis.”

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2025-05-21 19:37:00

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