Goldman: “The World Is on The Brink of A Rather Severe Recession”
The comments below are an edited and abridged synopsis of an article by Tyler Durden
Goldman Sachs refuses to make a recession its base case (but is quick to make it clear that, in case of recession, the S&P will drop to 3,150). It has looked back at the 77 recessions across the globe since 1961 to provide context around the current economic environment in a report titled “Revisiting Recession Facts.” The report’s bottom line, according to Goldman’s Chris Hussey: “Some of what we are seeing today—economic overheating and large increases in rates—suggests that the world could be on the brink of a rather severe recession.”
Goldman highlights several other aspects of the current environment that provide a buffer against a notable turndown in activity, with the key thing to watch being the fiscal and monetary response to the downturn. And since Democrats will lose Congress this November and there will be no new fiscal stimulus until 2025 at the earliest, the only thing to keep an eye on is the monetary response, i.e., when the Fed will cut rates back to zero; resume QE; and/or cut rates to negative.
Durden discusses the frequency of recessions; severity; predictors of severity; and implications.