Business conditions are starting to worsen, according to an indicator from Morgan Stanley that tracks the business environment. The Business Conditions Index created by the Wall Street bank declined 32 points in May, which is the largest drop since the Great Recession. Another business indicator developed by Morgan Stanley also fell to its lowest level since 2007-2008.
The report comes on the heels of a turbulent trading month where stocks fell to correction territory early in the month only to gain more than 6 percent mid-month. Markets continue to drift higher even as trade tensions between the United States and China ratchet tighter.
Many business leaders are not as confident today, and many say it is a result of the U.S.’s trade dispute with China. Additionally, the U.S. is now facing a trade dispute with India as the world’s second-most populous country said it will now impose tariffs on U.S. imports.
Business leaders say they are unable to formulate strategies due to the rising trade tensions. This is hurting the job market as well, according to the data released by Morgan Stanley. Domestic job growth is slowing down significantly with the U.S only creating 75,000 new jobs (economists’ forecasted 185,000 new jobs) last month. Economists at Morgan Stanley fear the weak job numbers in May could spill over to June.
Morgan Stanley believes the weak numbers could lead to business expansion coming to a stop in June. The Dow Jones Industrial Average, NASDAQ and the S&P 5000 were all down after Morgan Stanley released its report. The chip sector took a hit as well with Broadcom lowering its guidance for the rest of 2019.
Some economists fear that U.S. stock markets could lose 35 percent or more of their value if another recession occurs in the next 18 months. The report by Morgan Stanley only strengthens the anxiety some financial analysts feel about the U.S. sinking into another recession.