Morgan Stanley CEO sees 50% chance of U.S. recession

By Elizabeth Dilts Marshall

NEW YORK (Reuters) -There is a 50% opportunity the U.S. economy will enter a economic downturn though any downturn is unlikely to be severe, Morgan Stanley CEO James Gorman said on Monday, warning of a “bumpy” ride in advance for buyers.

“It is possible, likely 50-50 odds now,” Gorman informed a meeting hosted by the Wall Road bank, revising up his personal forecast from very last month when he instructed investors the probability of recession was a lot less than 50%.

“It is heading to be bumpy. People’s 401(K) ideas are likely to be down this 12 months,” he included, referring to U.S. retirement strategies. “But we’re not likely at this stage to go into a deep or extended recession.”

The benchmark S&P 500 seemed set to ensure a bear sector on Monday right after falling extra than 20% from its Jan. 3 file closing high thanks to growing investor fears of a likely recession.

Executives speaking at a Morgan Stanley economical industry convention said U.S. consumers and providers continue being in very good fiscal condition, which will assist the economy bounce again from any contraction and insulate banks from the effect.

Lender of America Corp’s Chief Monetary Officer Alastair Borthwick previously in the working day said his bank’s bank loan portfolio was not nonetheless showing any symptoms of a looming economic downturn.

“There’s this dilemma of what will happen in the potential, and you can find what are we looking at proper now. And what we’re viewing correct now, credit rating is in good form,” Borthwick explained, when questioned about asset high-quality.

Financial institution of America, the 2nd-biggest U.S. bank by belongings, described client paying is up 9% this June compared to last 12 months, when credit score card balances remain reduced than ahead of the pandemic. Those are two indications that people are wholesome and not “above-prolonged,” Borthwick said.

The bank’s corporate clients continue to borrow, and credit rating excellent in the travel, cafe and lodge sectors is increasing, he extra.

“Across the board correct now we’re seeing moderately good bank loan growth,” he stated, introducing advancement was envisioned in the “substantial one digits.”

Borthwick’s reviews contrasted with those manufactured by JPMorgan Main Executive Jamie Dimon previously this thirty day period.

Dimon claimed that inflation, the conflict in Ukraine and other difficulties going through the economic system were akin to a “hurricane” coming down the street.

Equally Borthwick and Gorman explained the financial investment banking natural environment as challenged, as much less companies have gone community in the volatile current market.

Borthwick warned Financial institution of The united states expects to report a $100-$150 million produce down on its leveraged finance portfolio this quarter.

(Added reporting by Carolina Mandl and Sinead Carew enhancing by Jonathan Oatis, Michelle Rate and Deepa Babington)