Mike Wilson do Morgan Stanleya pessimist Marketplace in actions who predicted this year’s liquidation, is not yet ready to join the growing chorus of prominent voices from Wall Street who say that a recession in USA it’s inevitable.
“It’s not our base case, it’s our bear case,” the investment bank’s chief equity strategist told Bloomberg Television. “We’re not there yet.”
Earlier this week, participants at the Qatar Economic Forum, from Tesla CEO Elon Musk to economist Nouriel Roubini, warned that the world’s largest economy is heading for a recession.
And Jamie Dimon, head of the JPMorgantold investors in early June to brace for an economic “hurricane” amid an unprecedented combination of challenges.
“Without a doubt, the negative scenario has increased in probability,” Wilson said Thursday, referring to the chances of a recession. “It’s probably something like 50% for the base case, 35% for the bear case, and 15% for the bull case.”
Wilson recently said that the fall in US stocks has left them more priced, but that the S&P 500 would need to drop to around 3,000 points to fully reflect the effect of an economic contraction, should it occur.
That would imply a drop of around 20% from Wednesday’s close of 3,759.89.
Although a drop of this magnitude would imply a “mild recession”, some financial conditions continue to support the economy, according to the strategist.
“The banking system is very secure,” he said. “There is a lot of capital, even in companies. The consumer balance sheet is in good shape.”
The main strategists of Société Générale It’s from Goldman Sachs (GS) also recently warned of further declines ahead as equities have yet to priced in the risk of an economic contraction.
“We want to invest in falling prices,” Wilson said. “But we think it’s premature if the risk of recession is still rising.”
To invest, companies have to be profitable, he said. “The era of paying for non-profit growth, this is a trend that will not return.”
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