Goldman Sachs Raises Odds of Recession in US, Cuts GDP Outlook

JUN 21 2022·Updated JAN 20 2023

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Image credit: Xinhua/Getty Images [via Fox Business]

The Facts

Investment banking giant Goldman Sachs has lowered its GDP forecast and doubled the odds - from 15 to 30% - that the US economy will experience a recession in the next 12 months.
Business Insider
The moves by Goldman Sachs analysts came in response to the Federal Reserve Bank's (Fed's) dramatic rate hike of .75% last week - the largest single rate hike since 1994.
Business Insider
Goldman's analysts fear that the Fed may bring the US economy to a standstill through fiscal tightening to resolve soaring inflation, but they also acknowledged that it might be possible to tame inflation without setting off an unemployment crisis.
FOX News
Meanwhile, analysts at Morgan Stanley are cautioning that US equities may have further to fall, despite already having sunk into bear market territory after a downward correction of over 20% from their recent highs.
Reuters
Morgan Stanley analysts also warned that current inflation appears to be "very stubborn" and that the ongoing risk to markets would not subside until either a recession arrives or the risk of one is extinguished.
Forbes
Analysts at BlackRock Investment Institute similarly cautioned investors against 'buying the dip' - or purchasing equities at the current price - out of fear that Fed tightening will further hamper economic growth.
Reuters

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The Spin

Establishment-critical narrative

80% of economists see conditions lining up for a period of prolonged 'stagflation' in the US: high inflation rates combined with stubbornly low growth and lower employment. In fact, those conditions are baked into the Fed's current rate hikes - which signal lingering inflationary concerns - that will no doubt lead to higher unemployment.

CNBC

Pro-establishment narrative

So the era of cheap money is over, right? Hardly. The Fed is raising rates to fight inflation, but those inflationary pressures are most likely transitory. Once higher rates have brought inflation back down to a manageable - even desirable - level of 2-3%, rates are likely to return to their new lower normal.