Financial Professionals

September 4th, 2017

Banks Warn of Impending Market Downturn

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Over the past two weeks or so, I’ve had a few Zacks Investment Advisors and clients ask me about a recent Bloomberg article that alluded to an impending downturn in the economy and markets. The article cites reports published by Morgan Stanley, Citigroup, Bank of America, HSBC, and Societe Generale SA – all big players with established reputations in the field. It is understandable, then, why seeing the article may have put some investors on edge.

I saw enough feedback on the article that I decided to make it the topic of this week’s post. Before I dive into reviewing the perspectives outlined in the article and offering some of our own, it is worth reminding readers that Zacks Investment Management conducts all of its research and market forecasts independently, via our parent company Zacks Investment Research. As such, we do not place much weight (actually, no weight) in what other banks or research firms publish. The fact that the Bloomberg article cited mostly warnings about a downturn does not alter our outlook one bit. We use our own databases, software, and models to conduct completely unbiased research, which sets us apart from other wealth management firms and investment firms.

With that, let’s dive in. The first thing I’d point out is that the Bloomberg article seemed to be a hodgepodge of potential warning signs, as opposed to being a full thesis issued by any one of the banks. In other words, I got the sense that these negative outlooks may have been cherry-picked from broader research notes, which may have potentially listed other neutralizing/positive forces. If there were positive, off-setting forces mentioned in the banks’ reports, the Bloomberg article did not mention them.

Here are a few of the warning signs mentioned:

Bottom Line for Investors

There were other warnings issued in the article, like slowing manufacturing data and investors mispricing risk due to too much optimism about stocks. But, most of these prognostications simply confirm something we have already been saying for some time – that we see the U.S. economy and this bull market in a maturing, late cycle phase. Being ‘late cycle’ is not the equivalent of being over, however. An economy can grow at a snail’s pace for years before giving way to a recession, and I think the U.S. and the global economy are likely to do just that for the next 6-12 months. Our outlook remains positive.

Now the question becomes, “What should you as an investor do about this?”

Disclosure

DISCLOSURE

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss.

Zacks Investment Management, Inc. is a wholly-owned subsidiary of Zacks Investment Research. Zacks Investment Management is an independent Registered Investment Advisory firm and acts as an investment manager for individuals and institutions. Zacks Investment Research is a provider of earnings data and other financial data to institutions and to individuals.

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel. The information contained herein has been obtained from sources believed to be reliable but we do not guarantee accuracy or completeness. Publication and distribution of this article is not intended to create, and the information contained herein does not constitute, an attorney-client relationship. No recommendation or advice is being given as to whether any investment or strategy is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole.
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