Odds of US Recession at 60%, Goldman Sachs and JPMorgan Lower Growth Forecasts
By Goldman Sachs raised its estimates of the odds of a U.S. recession to 35% over the next 12 months on March 15, citing increased uncertainty around the economic effects of small bank stress.[0] According to JPMorgan economists, slower loan growth by mid-size banks could subtract a half to a full percentage point off the level of GDP over the next year or two.[1] Goldman Sachs analysts also lowered their 2023 economic growth forecast by 0.3 percentage points to 1.2%.[1]
The European Central Bank is seen scaling back rate hikes at its meeting on Thursday, and market may be nearing its Lehman moment yet again, according to Art Cashin, the director of floor operations at UBS.[2] [3] Cashin said certain market participants may be trying to “agitate things as much as possible” for their own financial gain.[3]
The faith in Credit Suisse Group AG, an extensive lender entwined in the worldwide financial system, is declining rapidly, increasing the possibility of a bank-lending crunch that could potentially lead to an economic recession.[2] Additionally, First Republic Bank, which was downgraded by both S&P Global Ratings and Fitch Ratings on March 15, is exploring strategic options — including a sale.[2]
Overall, the odds of a U.S. recession within the next 12 months remain high, with those surveyed by Bloomberg putting the odds of a recession at 60%.[0]
0. “Shrinking savings and rising debt leave consumers on shaky financial footing” NBC News, 18 Mar. 2023, https://www.nbcnews.com/politics/economics/shrinking-savings-rising-debt-leave-consumers-shaky-financial-footing-rcna75389
1. “A recession could come sooner on cooling bank lending” CNBC, 15 Mar. 2023, https://www.cnbc.com/2023/03/15/a-recession-could-come-sooner-on-cooling-bank-lending-.html
2. “Recession Fears Soar as Credit Suisse Woes Threaten Loan Crunch” Yahoo News, 16 Mar. 2023, https://news.yahoo.com/recession-fears-soar-credit-suisse-062207564.html
3. “The market is on the verge of a Lehman-style event as the financial world thrashes in the wake of global banki” Business Insider India, 17 Mar. 2023, https://www.businessinsider.in/stock-market/news/the-market-is-on-the-verge-of-a-lehman-style-event-as-the-financial-world-thrashes-in-the-wake-of-global-banking-turmoil-veteran-trader-art-cashin-says/articleshow/98741749.cms
