Michael Wilson of Morgan Stanley has been very good this cycle. Today he picks up on one of my favorite topics, the US teetering inventory mountain. As this greatest ever pile of consumption goods is destocked then over-ordering, over-employment and all manner of supply-side tensions will enter a reverse bullwhip effect and prices plus earnings crash as a global trade shock is unleashed.
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While we maintain our bearish outlook, it’s no longer out of consensus. However, given the risks to growth are just emerging, it’s too early to get bullish. Biggest areas of risk remain the consumer’s ability and/or willingness to spend, margin pressure and a cyclical downturn for tech spending.
