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Morgan Stanley: This Move by Trump Could Trigger a Recession


May. 20 2019, Published 3:24 p.m. ET

The broader market sell-off continues

On May 20, the US stock market continued to fall after ending the previous couple of weeks in negative territory. In the weeks that ended on May 17 and May 10, the NASDAQ Composite Index fell 3.0% and 1.3%, respectively.

Today at 2:30 PM EDT, the NASDAQ, the S&P 500, and the Dow Jones Industrial Average were down 1.3%, 0.6%, and 0.3%, respectively. A recent escalation in US-China trade tensions has taken a toll on investors’ sentiments, triggering a massive sell-off.

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Morgan Stanley warns of a recession

Earlier today, popular investment bank Morgan Stanley warned investors that if President Donald Trump were to impose more tariffs on Chinese imports, it could lead to a recession.

The investment bank’s chief economist, Chetan Ahya, said in a note to investors, “If talks stall, no deal is agreed upon and the U.S. imposes 25% tariffs on the remaining $300 billion of imports from China, we see the global economy heading towards recession,” CNBC reported.

The analyst believes that the deteriorating economic situation could force the US central bank to act and cut interest rates. At the same time, China may continue to increase its fiscal stimulus.

Stocks and large ETFs under pressure

Today’s broader market sell-off pressured large ETFs, including the tech-heavy SPDR S&P 500 ETF (SPY) and the Invesco QQQ Trust, Series 1 ETF (QQQ), which fell 0.8% and 1.8%, respectively. SPY and QQQ both have Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), and Facebook (FB) as their top four holdings.

The stock market sell-off isn’t limited to just US companies. The iShares China Large-Cap ETF (FXI) is down 1.4% so far today. Chinese gaming giant Tencent Holdings (TCEHY) makes up nearly 10% of FXI’s portfolio. Tencent has tanked nearly 5% today, which has resulted in FXI’s fall of more than 1%.


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