Wall Street experts say increased stock market volatility may be signs of an impending recession as Donald Trump’s trade war with China continues to heat up.
Over just the last few days, economists at Goldman Sachs, Morgan Stanley and Bank of America all warned that Trump’s bitter trade war with China is taking a bigger bite out of economic growth than expected.
The warnings came as stocks suffered another big dip on Monday with the Dow closing off nearly 400 points, or 1.5 percent, putting the blue-chip index at 25,897, over 700 points lower than it was in January of 2018 before Trump’s trade fights began in earnest. Stocks bounced back Tuesday after the Trump administration’s announcement about postponing some tariffs that had been set to take effect next month, continuing a long track record of market volatility tied to trade policy.
The collective wisdom now spreading across Wall Street is that no trade deal will be struck with China before the 2020 election; business investment will continue to sag; and a series of interest-rate cuts from the Federal Reserve won’t be enough to juice more growth out of an economy now in its tenth year of expansion — the longest stretch in American history.
With economic growth slowing to 2.1 percent in the second quarter, Trump is predictably shifting from crowing about the stock market to blaming the Federal Reserve for not utilizing more interest rate cuts.
Bank of America’s head of U.S. economics Michelle Meyer said in a note to clients that she believes there is a 1-in-3 chance of a recession in the next 12 months.