Displaying items by tag: recession

(Munich)

In a very worrying report from the EU< European manufacturing is in a “free fall”. Data from Germany, the bloc’s largest economy, shows that the country’s manufacturing industry is declining rapidly. “In manufacturing, the business climate indicator is in freefall”, said the head of a highly regarded economic research group. The chief economist at Commerzbank added that “there is far and wide nothing to be seen of the second half recovery hoped”, continuing “Germany is in a grey area between a marked growth slowdown and a recession”.

FINSUM: Europe certainly looks headed for a recession (unless the ECB can save it). Will the US catch the economic flu this time, or remain Teflon America?

(New York)

UBS just went on the record warning of a potential bursting bubble in equity markets. The bank’s CEO says that global coordinated central bank easing posed a threat to markets and risked inflating a bubble. “I’d be very, very careful about growing further the balance sheet of central banks”, said CEO Sergio Ermotti. He further explained that current market prices were out of sync with investor sentiment, posing a risk. However, he did say that clients were ready to buy the dips in the market, which was an encouraging sign.

FINSUM: The equity markets remind us a bit of US politics at the moment. There are a lot of people in the middle without a lot of conviction, but those on the sharper ends are driving the whole thing forward.

(New York)

Gold has been stuck in a bear market for a long time. However, it is getting close to completely breaking out of its funk, as the yellow metal is at a 6-year high. Gold is being driven by worries over the economy, falling yields, and a potentially weaker Dollar, as well as geopolitical fears. UBS summed up gold’s position this way, saying “[Due to the] declining cost of holding gold as rates remain low or continue to fall, gold’s appeal as a diversifier and alternative asset amid the current macro environment is increasing”.

FINSUM: Our only worry about gold is if rate cuts cause a risk-on move by investors that will leave gold in the dust.

(New York)

The bearish stream of warnings from Morgan Stanley continues unabated. The bank’s wealth management CIO has just made another big call for the firm, saying a correction is likely. Lisa Shallett of MS Wealth management says that the Fed is trying to fight the end of the cycle, and it will likely prove too hard to do. She believes that a recession and correction are highly likely in the next year and that stocks will drop by at least 10%. That said, she advises investors to buy further intro underperforming sectors.

FINSUM: Morgan Stanley says explicitly that they think the bond market’s call on the economy is more correct than stocks and that an economic hard landing is likely coming.

(New York)

Second quarter earnings season is about to begin, and nobody has much expectation for good news. Analysts across the board expect earnings to shrink, brining back the first profit recession since 2016. Materials, technology, and consumer discretionary are set to get hit the hardest, but the majority of sectors are likely to see losses. Analysts estimate the average earnings decline for the S&P 500 will be 2.8%.

FINSUM: It will be interesting to se if this has any effect on stocks. Given it is so telegraphed, we don’t think there will be a big impact unless the losses are much steeper than expected.