Dow Jumps 500 Points Even As Experts Warn Recession Could Lead To Further Stock Selloff
ForbesSep 09, 2022
Goldman Sachs Raises Odds of Recession in US, Cuts GDP Outlook
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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.
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.
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.
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.
