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Morgan Stanley Says US Growth Slowdown Worse Than Expected

  • Second-quarter earnings to determine direction of stocks: MS
  • Says equity risk premium has climbed to more reasonable levels

The US economy is firmly in the middle of a slowdown that’s turning out to be worse than expected amid the war in Ukraine and China’s Covid Zero policy, according to Morgan Stanley strategists.

With a recent dip in bond yields, investors are betting the Federal Reserve may turn less hawkish if inflation peaks in the second half of the year, but “any fall in rates should be interpreted as more of a growth concern rather than as potential relief from the Fed,” strategists led by Michael J. Wilson wrote in a note.