Summary of Key Points from the Conference Call Transcript Industry Overview - **US Economic Growth**: The US economy is nearing stall speed, indicating growth below potential, which could weaken the labor market in a self-reinforcing manner [1][2][3] - **Tariff Impacts**: Recent increases in tariff rates, particularly a 25% reciprocal tariff on India, are expected to negatively impact economic growth forecasts for various countries [7][8] Core Insights - **US Job Growth**: Underlying job growth in the US has significantly decreased to 28,000 jobs per month from 206,000 in Q1, with a modest rise in the unemployment rate to 4.25% [1][3] - **GDP Growth Forecasts**: Full-year GDP growth for the US is projected at 1.1%, with a slowdown to approximately 1% in H2 2025, down from 1.2% in H1 2025 [1][2] - **Federal Reserve Actions**: Anticipation of three consecutive 25 basis point rate cuts by the Federal Reserve in September, October, and December, with two additional cuts expected in the first half of 2026 [1][2] Tariff Analysis - **India's GDP Impact**: The new tariff on India has led to a reduction in GDP growth forecasts to 6.5% for 2025 and 6.4% for 2026, down from 6.6% previously [7][8] - **Brazil's GDP Impact**: A newly implemented 50% tariff on Brazil is estimated to lower its GDP by approximately 0.25 percentage points [8] - **Overall Tariff Trends**: An overall increase in the US effective tariff rate of around 14 percentage points is expected by the end of 2025, with further increases anticipated by early 2027 [8] Other Important Considerations - **Bank of England (BoE) Meeting**: Expectations for a 25 basis point rate cut by the BoE, with a gradual approach to future cuts due to elevated inflation [9] - **AI's Labor Market Impact**: While AI has not yet caused significant disruption, early signs indicate potential labor market changes in highly exposed industries, with an estimated 0.5 percentage point rise in unemployment during the transition period [11] Conclusion - The US economy is facing significant challenges with slowing growth and rising unemployment, compounded by tariff increases affecting international trade dynamics. The Federal Reserve's anticipated rate cuts may provide some relief, but the overall economic outlook remains cautious.

Market Trends - Emerging markets experienced a rally due to expectations of central bank rate cuts and positive earnings outlook [1] - Increased risk sentiment fueled the rally in emerging markets [1]

June 16, 2025 01:13 PM GMT Morgan Stanley Research Global Morgan Stanley Global Macro Forum Geopolitical Tensions in the Middle East – Our Early Thoughts on Implications for the Economy and Markets June 16, 2025 Serena Tang – Global Head of Cross-Asset Strategy | Strategist Seth Carpenter – Chief Global Economist Brian Gibbons – Head of Energy Credit Research | Credit Analyst MORGAN STANLEY & CO. LLC Martijn Rats – Global Commodities Strategist | Equity Analyst and Commodities Strategist Marina Zavolock – C ...