The note also cited a slowdown in money supply that is consistent with declines. Specifically, the Federal Reserve’s four rate hikes in 2018, combined with the reduction of the bond portfolio on its balance sheet, have caused the money supply to slow.
“We would also stress that the contraction in the Fed balance sheet is unprecedented and, although correlation is not causation, that such a contraction has historically been problematic,” Garthwaite said.
The firm also sees some problems with China, though it is not advising clients to ditch investments in the country.
Chinese growth is on pace to post its slowest level since 2009, and the country finds itself locked in a bitter trade dispute with the U.S. that has featured tit-for-tat tariffs that has slowed the movement of goods from the world’s second-largest economy.
“China is the biggest macro risk globally. Our bottom line is that we see demand growth slowing further, with some destocking likely, and have yet to see the policy response to cause [Purchase Manager Indexes] to stabilize. We would stress, though, that we do not believe China has run out of policy flexibility, and do not see the preconditions in place for a hard landing,” the analysts wrote.
Credit Suisse joins a number of other forecasters tempering expectations for this year.
J.P. Morgan this week lowered its S&P 500 price target from 3,100 to 3,000. Piper Jaffray, usually one of Wall Street’s most optimistic firms, this week reiterated its 2,725 price target for a year that it expects to be “rangebound” for the large-cap market index.