Morgan Stanley Puts US Economy on Recession Watch Over Bond Yields

According to Morgan Stanley, the US stock market and economic outlook are deteriorating and the risks of a recession are increasing.

Arslan Butt•Wednesday, May 29, 2019•1 min read

According to Morgan Stanley, the US stock market and economic outlook are deteriorating and the risks of a recession are increasing. The main drivers are, unsurprisingly, the trade war with China as well as weak economic data releases in recent times.

The bank quotes weak economic data from April, which was before the recent escalation of trade tensions between US and China, to reinforce its concerns. Several economists are also expecting growth and earnings to slow down in H2 2019. Economists at Morgan Stanley have cut their GDP forecast for H2 2019 from 1.0% to 0.6%, while JP Morgan has cut the Q2 GDP outlook from 2.25% to 1.0%.

Another warning signal about the US economy slowing down is visible in the Treasury yields. The yield on the benchmark 10-year Treasury note fell below than the yield on the 3-month Treasury note. On Tuesday, the yield on the 3-month bill touched 2.361% while that of the 10-year Treasury note was 2.266%.

Investors consider this to be a sign of an impending recession. According to the investment bank, the adjusted yield curve first inverted in November and has continued to remain negative since then.

Check out our free forex signals
Follow the top economic events on FX Leaders economic calendar
Trade better, discover more Forex Trading Strategies
Open a FREE Trading Account

ABOUT THE AUTHOR See More

Arslan Butt

Index & Commodity Analyst

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.