If Morgan Stanley Is Right, The World Is Now In A Recession

Monday, June 17, 2019
By Paul Martin

by Tyler Durden
Mon, 06/17/2019

It’s Monday, which means a new dose of gloom has been released by Morgan Stanley’s “prophet of doom”, chief US equity strategist Michael Wilson, who writes this morning that he “sees an increasingly risky environment as deteriorating data and a dovish Fed stand off.”

As a reminder, last Friday we reported that the Morgan Stanley Business Conditions Index just suffered its biggest one month drop in history. Predictably, this was sufficient ammo for Wilson to launch on what may be his most bearish tirade so far this year, and as the strategist writes, “data points and analyst sentiment are falling and we think PMIs and earnings revisions are next.” That’s just the beginning:

Decelerations and disappointments are mounting:

Cass Freight Index
Retailer earnings
Durable goods orders
Capital spending
May payrolls
Semiconductor inventories
Oil demand
Restaurant performance indices…

and our own Morgan Stanley Business Conditions Index (MSBCI). Looking at the MSBCI in particular, the headline metric showed the biggest one-month drop in its history going back to 2002 and very close to its lowest absolute reading since December 2008.

This index has a tight relationship with ISM new orders and analyst earnings revisions breadth. Our analysis shows downside risk to ISM new orders (25% y/y), S&P earnings revisions breadth (6-13%) and the S&P 500 y/y (8%) if historical links hold.

The Rest…HERE

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