Goldman sees US recession risk as high as 35%, cuts forecast

Goldman sees US recession risk as high as 35%, cuts forecast
Recession odds in-line with 20%-35% implied by yield curve due to soaring oil prices and fallout from war in Ukraine.
MAR 11, 2022
By  Bloomberg

Goldman Sachs Group Inc.’s economists warned the probability of a U.S. recession in the next year may be as much as 35% as they cut their forecasts for growth due to the hit from soaring oil prices and other fallout from the war in Ukraine.

Economists led by Jan Hatzius cut their prediction for expansion this year to 1.75% from 2.0%, on fourth quarter-to-fourth quarter basis, they wrote in a note published late Thursday.

Such an outlook left them saying the chances of recession in the coming year are “broadly in line with the 20%-35% odds currently implied by models based on the slope of the yield curve.”

The downgrade comes as U.S. consumer price gains accelerated in February to a fresh 40-year high on rising gasoline, food and housing costs, with inflation poised to rise even further following Russia’s invasion of Ukraine.

Earlier this week, Federal Reserve Chair Jerome Powell reaffirmed the U.S. central bank is on track to raise interest rates this month and commence a series of hikes to curb the highest inflation in decades, though he said Russia’s invasion of Ukraine means it will move “carefully.”

The new Goldman forecast “implies below potential growth in 2022 Q1 and 2022 Q2 and potential growth for 2022 overall,” the economists wrote in the note, adding that higher oil and agricultural prices will weigh on disposable incomes.

The war in Ukraine means the International Monetary Fund is also likely to cut its projection for global growth for this year when it presents revised forecasts ahead of the lender’s spring meetings next month, managing director Kristalina Georgieva said Thursday.

The IMF in January lowered its projection for 2022 to 4.4% as the Covid-19 pandemic entered its third year, citing weaker prospects for the U.S. and China, along with persistent inflation.

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.