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Economy

Stocks will drop as the economy is either about to enter a recession or the Fed is poised to keep rates higher for longer, Morgan Stanley CIO says

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Getty Images / Drew Angerer
  • Stocks are set to fall further, Morgan Stanley’s top stock strategist Mike Wilson predicted.
  • That’s because the economy is either headed for a recession or the Fed will keep interest rates high.
  • Both factors will weigh on corporate earnings, which are likely to fall below estimates, Wilson said.

Stocks are set to fall further, as investors realize the economy is either headed for a recession or the Federal Reserve is poised to keep interest rates higher for longer, according to Morgan Stanley’s top stock strategist Mike Wilson.

In a podcast on Monday, Wilson pointed to recent upbeat sentiment in the stock market, likely because investors are expecting the Fed to cut interest rates later this year, all while maintaining expectations for further economic growth. But the probability of both of those happening are low, he said, and that spells trouble for corporate earnings, and in turn, the stock market.

“We believe the equity market continues to expect the best of both worlds: interest rate cuts and durable growth,” Wilson said. “Instead, we believe another chapter of our fire-and-ice narrative is possible: in other words, a tighter Fed even as growth slows towards recession. This will be a difficult environment for stocks,” he later warned.

Wilson has warned before that stocks are facing a “fire-and-ice” scenario, in which high inflation and the possibility of a recession will weigh on corporate earnings. Though investors have been encouraged by surprisingly strong earnings over the past quarter, a continuation of the trend isn’t supported by the economic data, Wilson said.

“If one is to believe our leading indicators that point to downward trends in earnings-per-share surprising margins in the coming months, stocks will likely follow that negative path lower,” he added.

Wilson has predicted that the worst earnings recession since 2008 could hit the market this year, which could take stocks down 26%.

That comes after an already difficult year for equities, with the S&P 500 losing 20% in 2022 as the Fed aggressively hiked interest rates to tame inflation. Higher rates have significantly raised the odds of recession, experts say, and they’ve also weighed heavily on corporate profits by raising the cost of borrowing.

The Fed hiked interest rates another 25 basis-points last week, lifting the Fed funds rate target to 5-5.25%. Investors are pricing in a 33% chance the Fed could cut rates as soon as July, per the CME FedWatch tool, though that possibility has been dismissed by other Wall Street strategists, who say the Fed will pause and then keep rates elevated.

Read the original article on Business Insider

 

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Economy

Mark Carney to lead Liberal economic task force ahead of next election

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NANAIMO, B.C. – Former Bank of Canada governor Mark Carney will chair a Liberal task force on economic growth, the party announced Monday as Liberal MPs meet to strategize for the upcoming election year.

Long touted as a possible leadership successor to Prime Minister Justin Trudeau, Carney was already scheduled to address caucus as part of the retreat in Nanaimo, B.C., this week.

The Liberals say he will help shape the party’s policies for the next election, and will report to Trudeau and the Liberal platform committee.

“As chair of the Leader’s Task Force on Economic Growth, Mark’s unique ideas and perspectives will play a vital role in shaping the next steps in our plan to continue to grow our economy and strengthen the middle class, and to urgently seize new opportunities for Canadian jobs and prosperity in a fast-changing world,” Trudeau said in a statement Monday.

Trudeau is expected to address Liberal members of Parliament later this week. It will be the first time he faces them as a group since MPs left Ottawa in the spring.

Still stinging from a devastating byelection loss earlier this summer, the caucus is now also reeling from news that its national campaign director has resigned and the party can no longer count on the NDP to stave off an early election.

Last week, NDP Leader Jagmeet Singh ended his agreement with Trudeau to have the New Democrats support the government on key votes in exchange for movement on priorities such as dental care.

All of this comes as the Liberals remain well behind the Conservatives in the polls despite efforts to refocus on issues like housing and affordability.

Some Liberal MPs hope to hear more about how Trudeau plans to win Canadians back when he addresses his team this week.

Carney appears to be part of that plan, attempting to bring some economic heft to a government that has struggled to resonate with voters who are struggling with inflation and soaring housing costs.

Trudeau said several weeks ago that he has long tried to coax Carney to join his government. The economist and former investment banker spent five years as the governor of the Bank of Canada during the last Conservative government before hopping across the pond to head up the Bank of England for seven years.

Carney is just one of a host of names suggested as possible successors to Trudeau, who has insisted he will lead the party into the next election despite simmering calls for him to step aside.

Those calls reached a new intensity earlier this summer when the Conservatives won a longtime Liberal stronghold in a major byelection upset in Toronto—St. Paul’s.

But Trudeau held fast to his decision to stay and rejected calls to convene his entire caucus over the summer to respond to their concerns about their collective prospects.

The prime minister has spoken with Liberal MPs one-on-one over the last few months and attended several regional meetings ahead of the Nanaimo retreat, including Ontario and Quebec, which together account for 70 per cent of the caucus.

While several Liberals who don’t feel comfortable speaking publicly say the meetings were positive, the party leader has mainly held to his message that he is simply focused on “delivering for Canadians.”

Conservative House leader Andrew Scheer was in Nanaimo ahead of the meeting to express his scorn for the Liberal strategy session, and for Carney’s involvement.

“It doesn’t matter what happens in this retreat, doesn’t matter what kinds of (communications) exercise they go through, or what kind of speculation they all entertain about who might lead them in the next election,” said Scheer, who called a small press conference on the Nanaimo harbourfront Monday.

“It’s the same failed Liberal policies causing the same hardships for Canadians.”

He said Carney and Trudeau are “basically the same people,” and that Carney has supported Liberal policies, including the carbon tax.

The three-day retreat is expected to include breakout meetings for the Indigenous, rural and women’s caucuses before the full group convenes later this week.

This report by The Canadian Press was first published Sept. 9, 2024.

The Canadian Press. All rights reserved.

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Economy

S&P/TSX composite down more than 200 points, U.S. stock markets also fall

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TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.

The S&P/TSX composite index was down 239.24 points at 22,749.04.

In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.

The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.

The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.

The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.

This report by The Canadian Press was first published Sept. 6, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

Here’s a quick glance at unemployment rates for August, by province

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OTTAWA – Canada’s national unemployment rate was 6.6 per cent in August. Here are the jobless rates last month by province (numbers from the previous month in brackets):

_ Newfoundland and Labrador 10.4 per cent (9.6)

_ Prince Edward Island 8.2 per cent (8.9)

_ Nova Scotia 6.7 per cent (7.0)

_ New Brunswick 6.5 per cent (7.2)

_ Quebec 5.7 per cent (5.7)

_ Ontario 7.1 per cent (6.7)

_ Manitoba 5.8 per cent (5.7)

_ Saskatchewan 5.4 per cent (5.4)

_ Alberta 7.7 per cent (7.1)

_ British Columbia 5.8 per cent (5.5)

This report by The Canadian Press was first published Sept. 6, 2024.

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