Morgan Stanley Warns Investors About 2018

Morgan Stanley says that investors have to be careful about 2018. It is warning that 2018 will be a tricky year. The economy in the United States and in China is expected to decline. Inflation will rise around the world. Andrew Sheets of Morgan Stanley said that he expects the growth of the United States economy to slow down as the economy enters the inning of the economic cycle. In China, the economy is also expected to slow down because of uncertainty about economic policy.

So far this year, the economy in both the United States and in China has grown at a good rate. In the United States, the GDP grew by 3% in the last two quarters, and in China, the GDP grew by over 6%. Morgan Stanley is predicting that the growth rates in 2018 will be less than what they were in 2017.

The tricky part is the economy in India and Brazil. The economies in those countries are crucial for the overall global economy. However, the economy in India hit an all-time low. In addition, the economy in Brazil has been growing at an extremely low rate.

Inflation is also expected to rise. In the United States, core inflation is expected to rise by a few points. Core inflation does not include food and energy. In China, overall inflation is expected to rise as well.

Monetary policy around the world is also expected to get tighter. Governments and central banks are expected to slow down their programs and not make as many interest hikes. Morgan Stanley is advising investors to stay safe by selling United States corporate bonds and buying European ones instead. The European market is more reliable and less volatile.

Brexit: UK Faces Economic Slowdown

UK has been facing a substantial economic slowdown since it exited the European Union. As reported by Independent, Britain’s GDP growth is forecasted to fall from this year’s 1.5 percent to 1.4 percent in 2018.

Citing financial analysts from Credit Suisse, a global financial services company, a report by the business insider has revealed that UK might plunge into a recession from the end of 2017. Sonali Punhani and Neville Hill, analysts from Credit Suisse, argue that despite the chances of the recession being small, there is a 38 percent probability that a technical recession might hit the country.

The analysts’ argument is based on the fact that a technical recession occurs when a country’s economy fails to thrive for two successive quarters. Reports from the Swiss banking giant indicate that UK’s economy grew by a mere 0.2 percent during the first quarter of this year with the bank’s current forecasts showing that UK’s economic growth will stagnate at 0.2 percent during the second quarter.

On top of the stagnated economic growth, UK’s turbulent political backdrop, and its dubious Brexit negotiations are possible factors that are likely to fuel the country towards a recession.

Credit Suisse’s new predictions come just a few months after forecasting another recession that never happened. With respect to the previous forecasts, the financial service provider admitted that their recession report was amiss. They also admit to have made errors while modeling the country’s growth. The analysts also revealed that UK’s consumer spending was better than they had predicted.