Morgan Stanley CEO sees a 50 percent chance of a US recession

NEW YORK, June 13 (Reuters) – There is a 50% chance the US economy will enter a recession, although a downturn is unlikely to be severe, James Gorman, CEO of Morgan Stanley (MS .N), on Monday, warning of a “bumpy” ride ahead for investors.

“It’s possible, the odds are probably 50-50 now,” Gorman said at a conference hosted by the Wall Street Bank, revising his own forecast from last month when he told investors the likelihood of a recession was less than 50% lie. Continue reading

“It’s going to be bumpy. People’s 401(K) plans will drop this year,” he added, referring to US retirement pensions. “But we’re not likely to go into a deep or long recession at this point.”

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The benchmark S&P 500 (.SPX) seemed to confirm a bear market on Monday after falling more than 20% from its record high on Jan. 3 amid growing investor fears of a possible recession.

Executives speaking at a Morgan Stanley financial industry conference said US consumers and businesses remain in good financial health, which will help the economy recover from a contraction and protect banks from the impact.

Earlier in the day, Alastair Borthwick, chief financial officer of Bank of America Corp (BAC.N), said his bank’s loan portfolio showed no signs of an imminent recession.

“There’s this question of what’s going to happen in the future and there’s what we’re seeing right now. And what we’re seeing right now is that credit is in great shape,” Borthwick said when asked about asset quality.

Bank of America, the second-biggest U.S. bank by assets, reported that customer spending rose 9% year over year this June while credit card balances are lower than before the pandemic. Those are two signs consumers are healthy and not “overstretched,” Borthwick said.

The bank’s corporate customers continue to borrow and credit quality in the travel, restaurant and hotel sectors is improving, he added.

“Right now we’re seeing quite good credit growth across the board,” he said, adding that growth is expected to be in the “high single digits.”

Borthwick’s comments contrasted with those made by JPMorgan (JPM.N) Chief Executive Jamie Dimon earlier this month.

Dimon said inflation, the conflict in Ukraine and other challenges to the economy are tantamount to a “hurricane” coming down the road. Continue reading

Both Borthwick and Gorman described the investment banking environment as challenging with fewer companies going public in the volatile market.

Borthwick warned that Bank of America expects to report a $100 million to $150 million writedown on its leveraged finance portfolio this quarter.

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Additional reporting by Carolina Mandl and Sinead Carew; Editing by Jonathan Oatis, Michelle Price and Deepa Babington

Our standards: The Thomson Reuters Trust Principles.

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