Morgan Stanley slashes outlook for US banking sector

Morgan Stanley has downgraded its outlook for the US banking sector, citing heightened recession risks after President Donald Trump launched a trade war with all countries and China responded with retaliatory tariffs late last week.

In a research note released today, April 7, Morgan Stanley’s analysts downgraded their outlook for large and mid-cap US banks from "attractive" to "compliant," Bloomberg reported.

The analysts noted that recent trade developments are fueling the risk of a recession, expecting slower GDP growth amid rising economic uncertainty to delay the recovery of capital markets.

They also downgraded Goldman Sachs rating from “Overweight” to “Equal Weight”, with a target price of $558, down from $659 previously.

Analysts see that forecasts for US banks' investment banking revenue and wealth management fees need to be adjusted, noting that JPMorgan, Citigroup, and New York Mellon will be affected the most by these adjustments.