The firm warns that there's now a 'heightened' recession risk that the Fed may not be able counter, and offers investing recommendations.
, President Donald Trump announced that the US would slap new tariffs on nearly all Chinese imports.
Their main conclusions were two-fold: the risk of a recession is now higher, and a key tool to combat the next one has lost some of its efficacy."And this time, we are worried," said Michelle Meyer, the bank's chief US economist, in the note. On the plus side, the level of initial jobless claims — among the earliest warning signs of trouble — is still very low and not sending a recessionary signal.Meyer noted that the economy's next slowdown will be harder to deal with than the most recent scares in 2012 and 2015.
In addition, the two scares occurred before the Fed started raising interest rates and shrinking its balance sheet. The central bank now has a more limited set of tools to fight the downturn.What BAML's chief investment strategist recommends
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