Analysts at Goldman Sachs reiterated their ‘well-above-consensus’ U.S. economic forecasts for 2023.
Goldman assigns just a 35% chance that the U.S. will enter a recession. The bank’s growth estimates are also much higher than the consensus but this could change if the regional banking turmoil or a different shock (e.g. debt limit) pushes the economy into recession.
Another scenario that could increase the chances of a recession is that upside inflation surprises force the Fed to deliver more monetary tightening
“Both outcomes are possible, but neither is likely in our view,” analysts said in a client note.
Overall, analysts argue that “markets should continue to climb the wall of worry in coming months.”
However, they see two factors that are likely limiting the upside for markets in 2023: A high valuation of risk assets, and the fact that projected soft landing is still a work in progress.
“This limits the room for much easier financial conditions and reinforces our view that the major central banks are further away from delivering rate cuts than markets are now pricing,” analysts concluded.