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Morgan Stanley stated Sunday that the U.S. economy will dodge a recession in 2023. The firm also predicted that the Federal Reserve will hold interest rates at current levels until March of 2024, when they will pivot lower.
The investment bank remains in the soft-landing camp for 2023. However, the firm noted that uncertainty around the drag on the economy from tighter credit conditions increases downside risk.
From an interest rate stance, the bank predicts that Jerome Powell and the Federal Reserve will hold rates for an “extended period before delivering the first 25bp cut in March 2024.”
Morgan Stanley added: “We expect [the Fed] to begin reducing the caps on balance sheet runoff, slowing the decline toward an eventual end to QT in late 2024. Three additional 25bp cuts at a quarterly pace bring the end-2024 policy rate back down to 4.1%.”
On a more broader market stance, the major averages (DJI), (SP500), and (COMP.IND) and their benchmark tracking ETFs (NYSEARCA:DIA), (NYSEARCA:SPY), (VOO), (IVV), and (NASDAQ:QQQ) remain relatively muted at the start of the week with more action seen in the bond and commodity markets.
Year-to-date market price action: Dow Jones +1.8%, S&P 500 +11.1%, and the Nasdaq Composite +25.3%.
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Source: seekingalpha.com
