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Wall Street sees higher probability of U.S. recession next year

Economy Jun 21, 2022 12:31PM ET
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© Reuters. FILE PHOTO: A girl speaks with her mother near a landmark statue of a bull in New York August 24, 2015. REUTERS/Lucas Jackson/File Photo

(Reuters) -Goldman Sachs forecast a 30% chance of the U.S. economy tipping into recession over the next year, up from 15% earlier, following record-high inflation and a weak macroeconomic backdrop due to the Ukraine conflict.

"We now see recession risk as higher and more front-loaded," Goldman economists said in a note on Monday.

The latest forecast comes about a week after the U.S. Federal Reserve rolled out its biggest rate hike https://reut.rs/3xKXhjZ since 1994 to stem a surge in inflation and as several other central banks also took aggressive steps to tighten monetary policy.

"We are increasingly concerned that the Fed leadership has set a high and inflation-specific bar for slowing the pace of tightening," Goldman said.

Meanwhile, economists at Morgan Stanley (NYSE:MS) on Tuesday placed the odds of a U.S. recession for the next 12 months at around 35%.

"At this point, a recession is no longer just a tail risk given the Fed's predicament with inflation," Morgan Stanley said.

Goldman forecast a 48% cumulative probability of a recession over the next two years compared to its prior forecast of 35%.

"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," economists at Goldman added.

UBS also said a recession would be shallow if it does happen, but it does not expect one in the United States or globally in 2022 or 2023.

Goldman, before the Fed rate hike, had argued that there was a "feasible though difficult" way to rebalance the labor market and bring down inflation without a recession.

Elon Musk earlier this month told Tesla (NASDAQ:TSLA) Inc executives he had a "super bad feeling" about the economy and that the electric-car maker needed to cut staff https://reut.rs/3tQLC21 and pause hiring.

Wall Street sees higher probability of U.S. recession next year
 

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Comments (5)
First Last
First Last Jun 21, 2022 12:43PM ET
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To the brainwashed who blames Biden for everything, this is in the 1st sentence: "weak macroeconomic backdrop due to the Ukraine conflict"
First Last
First Last Jun 21, 2022 12:42PM ET
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To the idiots who blame Biden for everything, this is in the 1st sentence: "weak macroeconomic backdrop due to the Ukraine conflict"
James Victorino
James Victorino Jun 21, 2022 12:35PM ET
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Apparently, recessions are now considered bullish for equity markets.
nick cage
nick cage Jun 21, 2022 12:29PM ET
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We are already in recession the just don't want to say it. it's just a term used politically.
Jeff Gordon
Jeff Gordon Jun 21, 2022 7:41AM ET
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30% lol, already in recession, they just don't know it
lup sup
lup sup Jun 21, 2022 7:41AM ET
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Where did they pluck the figure from?
 
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