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 | Canada News Media
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.
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.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
