By Seth Carpenter, Morgan Stanley's chief economist
This week, we published our Economics and Strategy Mid-Year Outlooks, a semi-annual collaborative exercise across the Morgan Stanley Research department. We lay out our baseline views and assumptions, highlighting what we think is likely to happen, but also where we might be wrong. Given the current overhang of policy uncertainty, a point forecast is of dubious value. We hope to lay out a framework and an idea of the distribution of possible outcomes.
We see the imposition of tariffs by the US as an outsized, fundamental shock to the outlook. Recent conversations suggest clients are feeling comforted that uncertainty is subsiding, but we hasten to add that tariffs remain and are likely to stay much higher than at the start of the year. Announcements late last week of sharply higher tariffs on Europe show that the risks of elevated tariffs are far from gone. Most importantly, the slowdown from tariffs that have already been imposed has yet to manifest in the hard data.
