Monday, January 15, 2018

Goldman: "Recession Risk is Low … For Now"

by Bill McBride on 1/15/2018 10:46:00 AM

A few excerpts from a note by Goldman Sachs economists:

• We expect strong global growth this year, given firm current momentum, easing financial conditions, and supportive fiscal policy. But high asset valuations and the prospect of labor market overheating suggest that the recent strength might be “too much of a good thing” further down the road.
• Our model suggests that near-term recession risk is low. The probability of a downturn is also below normal over the next 2-3 years, but has been rising steadily in economies that are seeing unusually easy financial conditions and tightening labor markets. These include the US, Germany, the UK and a number of smaller G10 economies ...

• Although our model is subject to a number of caveats, it confirms that we need to worry little about recession risk this year. But our analysis suggests that we should pay attention to measures of imbalances that signal rising recession risk further down the road.
CR Note: My view is recession risk is low this year, and I expect further growth in the US in 2018.