A number of banks say the threat of recession has sharply increased as a result of Federal Reserve actions, with Wall Street now expecting the worst for markets.
On Monday, Goldman Sachs revised ups its expectation for a recession, from a previous 15% threat level to 30%, with analysts warning, “We now see recession risk as higher and more front-loaded. Our best guess is that a recession caused by moderate overtightening would be shallow, though we could imagine it dragging on for a little longer than it would with more policy support.”
In a briefing note yesterday (Tuesday), Morgan Stanley said, “At this point, a recession is no longer just a tail risk given the Fed’s predicament with inflation.”
On the same day, BlackRock Investment Institute lent its voice to worries that economic growth is about to stall, saying “This dynamic raises serious growth risks, and we now see the U.S. restart of economic activity stalling over the coming quarters.”
For its part, Deutsche Bank says its now expecting that the struggle will trickle into next year and impact on 2023 growth forecasts. The bank’s strategist Jim Reid said, “The risk of an earlier move is clearly building with declining financial conditions, and consumer and business confidence plummeting. It’s hard to see markets recovering in the second half of the year if we see firm evidence of the recession.”
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