Home > News > Market Moves > Trade War Could Shove US into a Recession, Morgan Stanley Says
Market Moves

Trade War Could Shove US into a Recession, Morgan Stanley Says

Escalating conflict may slice corporate earnings and lower employment, firm warns.

By Larry Light

The mounting trade war, which lately has seen President Donald Trump pump up tariffs on Chinese goods to 25% from 10%, threatens to push the US into a recession, according to Morgan Stanley.

The higher costs imposed on American companies from the levies will depress US corporate earnings, the firm’s chief US equity strategist, Michael Wilson, wrote in a note to clients.

“In the case of 25% tariffs on all of China’s exports to the US,” Wilson warned, “we are inclined to think this has the potential to tip the US economy into recession given the cost issues companies are already dealing with.”

Trump last Friday increased the tariff burden on $200 billion worth of Chinese imports. He added that he may extend the tariffs to another $325 billion worth of goods. Beijing on Monday retaliated by hiking tariffs on $60 billion in US imports, mainly agricultural products.

For more stories like this, sign up for the CIO Alert newsletter.

The US stock market sank on Monday amid fears of economic disruption. The S&P 500 fell 2.41% and Nasdaq slid 3.41%.

The first impact of heightened trade hostilities would be to slice 1% to 1.5% off US corporate earnings, Wilson indicated, with the higher end of that range most likely. Tariffs can harm corporate earnings through higher costs, lower demand, reduced confidence, and shrunken investment, he pointed out.

“With trade resolution now looking like a ‘show me’ story for US corporates and the market,” Wilson wrote, “lack of resolution will be a material potential drag on earnings growth that will be harder to mitigate than the market expects as other costs rise in tandem.”

Morgan Stanley listed a panoply of US companies that would suffer from the trade war. The top five are: General Motors, Ford, tech outfit Aptiv, athletic gear maker Nike, and Tapestry, a luxury goods business.

In Wilson’s estimation, affected US companies would be forced to cut back, which would harm now-towering employment rates: “Surely, they would attack labor costs aggressively in such a scenario and unemployment would rise materially—the essence of an economic recession.”

Related Stories:

In Worsened Trade War, Goods Makers Will Hurt More, Goldman Sachs SaysNew York City Is Worried About China and the FedIMF Warns Tariffs, Tensions Pose Risk to Global Growth

Tags: , , , ,

Home > News > Corporate Moves > Deputy CIO and Former NextGen Departs Texas Pension Fund
Corporate Moves

Deputy CIO and Former NextGen Departs Texas Pension Fund

The alts-focused Sharmila Kassam moves to Funston Advisory Services.

By Chris Butera

Sharmila Kassam, a previous CIO NextGen and former deputy chief investment officer at the Employees Retirement System of Texas ($29.6 billion), has left the fund after more than 11 years.

“My focus now is pursuing my interests on a greater scale in the industry beginning with a portfolio of projects ranging from pension and investment governance to the perspectives of institutional investors in a challenging market,” she said in a Saturday post on LinkedIn.

Kassam recently started as a senior consultant at Funston Advisory Services, an advisor to public pensions, according to her page on the social media platform. But advising institutional clients is not all she plans to do. The investment professional’s LinkedIn post said she also has an “entrepreneurial endeavor” in the works, which she plans to announce next year.

Kassam’s allocation style is spread across a multitude of asset classes, but her area of expertise is private equity and credit. She was involved in the creation of all of Texas ERS’s alternative asset investment programs during her time at the pension plan.

For more stories like this, sign up for the CIO Alert newsletter.

Tom Tull, the fund’s CIO, called her a “reformed lawyer that is definitely Type A” in Kassam’s NextGen profile, highlighting her energy, and desire for advancing diversity, emerging managers, and better gender representation at institutions. “I consider Sharmila as an excellent resource in developing strategic direction, strategy, goals, and objectives for the investment program and its future,” he said.  

The fund has not announced a search or replacement, but a spokesperson said the position is “in transition.”

Kassam started in the fund as assistant general counsel of investments and securities, later promoted to chief of staff in 2012. She was named deputy CIO in 2014.

Kassam is the sixth NextGen from the inaugural class to change jobs within 12 months.

“The most rewarding aspect to me is the intellectual stimulation of the investment strategies, structures, and working with the team we have to execute our investment program,” she said in her NextGen profile. 

Kassam, Tull, and co-worker Panayiotis Lambropoulos could not be reached for comment. The fund said it cannot comment on personal matters, such as Kassam’s tenure.

 

Related Stories:

Sharmila Kassam NextGen Profile

Chaya Slain, Former NextGen and Forty Under 40 Achiever, Becomes CIO

At Pension Bridge: CIOs Debate Passive vs. Active, What Worries Them

Tags: , , , ,

«