For the third time since June, Investment bank
Goldman Sachs
lowered the odds on a recession hitting the U.S. in the next 12 months.
It now sees the chances of a contraction at 15%, down from a probability of 20% in July. It had the odds at 35% in March as regional banks were roiled by market turmoil.
To be sure, Goldman Chief Economist Jan Hatzius still sees a slowdown in the fourth quarter. But it will be “shallow and short-lived,” he said in a Monday note. Economists in a Bloomberg survey see about a 60% chance of recession in the coming year as an aggressive campaign of interest-rate increases hits the economy.
Goldman’s change of forecast comes after jobs data that showed an increase in unemployment. Hatzius isn’t concerned—the rise in the unemployment rate came from more labor force participation. Meanwhile, the inflation index is being distorted. Underlying inflation may already be near the Fed’s target, he said.
That’s set the U.S. up nicely for a so-called soft landing. Hatzius says his confidence that the Fed is done raising rates has only increased in the past month.
The nice outlook for the economy may not help stocks much, however. Goldman’s equity strategists’ forecasts suggest most gains from a soft landing and an artificial intelligence boom have already been realized, Hatzius said.
Write to Brian Swint at [email protected]
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