{"id":153384,"date":"2019-08-12T12:45:39","date_gmt":"2019-08-12T16:45:39","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=153384"},"modified":"2019-08-12T12:26:01","modified_gmt":"2019-08-12T16:26:01","slug":"goldman-boaml-warn-of-us-recession-risks","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/08\/goldman-boaml-warn-of-us-recession-risks\/","title":{"rendered":"Goldman & BoAML Warn Of US Recession Risks"},"content":{"rendered":"
August 12, 2019<\/div>
\r\n<\/div><\/div>

By <\/strong>Orbex<\/strong><\/a><\/p>\n

The ongoing trade war between the US and China is causing grave concerns among investors following warnings from global central banks and the IMF alike. Now, leading investment banks are starting to sound the alarms.<\/p>\n

Over the weekend, US banking giant\u00a0Goldman Sachs issued a note to clients<\/a>\u00a0warning them of the growing risk of a recession in the US.<\/strong>\u00a0In the note, Goldman said that its forecast for the growth impact from the ongoing trade war has been lifted to a 0.6% drag on GDP from 0.2% prior. Analyst Jan Hatzius explicitly stated:<\/p>\n

\u201cFears that the trade war will trigger a recession are growing,\u201d<\/p><\/blockquote>\n

GDP Estimates Cut<\/strong><\/h2>\n

Goldman also lowered its 4Q GDP estimate by 0,20%. The estimate now sits at 1.8% in light of the ballooning trade war.\u00a0<\/strong>They noted:<\/p>\n

\u201cOverall, we have increased our estimate of the growth impact of the trade war\u2026 The drivers of this modest change are that we now include an estimate of the sentiment and uncertainty effects and that \ufb01nancial markets have responded notably to recent trade news.\u201d<\/p><\/blockquote>\n

The note went on to explain that the elevated uncertainty from the trade war would take a toll on business spending until tensions subside, saying:<\/p>\n

\u00a0\u201cRelatedly, the business sentiment effect of increased pessimism about the outlook from trade war news may lead \ufb01rms to invest, hire, or produce less.\u201d<\/strong><\/p><\/blockquote>\n

While some forecasts have speculated that Trump\u2019s newly proposed tariffs will not come to pass, Goldman believed that\u00a0the tariffs will be activated<\/a>. They stated:<\/p>

\r\n
\r\n

Free Reports:<\/p><\/div>\r\n

\r\n

<\/a>\r\n\t Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p>

\r\n
\r\n
\r\n

<\/a>\r\n\t Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p>

\r\n<\/div>\r\n

\r\n
<\/div>\n

\u201cWe expect tariffs targeting the remaining $300bn of US imports from China to go into effect,\u201d<\/strong><\/p><\/blockquote>\n

BoAML Warn of Recessionary Risks<\/strong><\/h2>\n

These comments echo those made by Bank of America Merrill Lynch last week.\u00a0BoAML also issued a client note warning of rising US recession risks.<\/strong><\/p>\n

In its note, BoAML warned:<\/p>\n

\u201cWe now have a number of early indicators starting to signal heightened risk of recession.\u00a0Our official model has the probability of a recession over the next 12 months only pegged at about 20%,<\/strong>\u00a0but our subjective call based on the slew of data and events leads us to believe it is closer to a 1-in-3 chance.\u201d<\/p><\/blockquote>\n

The note went on to say:<\/p>\n

\u201cThree out of the five economic indicators (auto sales, industrial production, and aggregate hours worked) which track the business cycle closely are near levels consistent at the start of previous recessions. The slowdown in aggregate hours worked is primarily due to a pullback in average weekly hours worked which is now tracking below trend. The bright spot is that initial jobless claims \u2013 which are arguably the most reliable early indicator \u2013 remain stuck at low levels.\u201d<\/p><\/blockquote>\n

Impact on The Fed<\/strong><\/h2>\n

With an increasing number of forecasters now warning of US recessionary risk factors, expectations for further easing from the Fed are likely to build once more. This is despite the Fed having downplayed the prospect of further easing when it cut rates in July.\u00a0The CME Group Fed Watch tool shows the market is pricing in a 60% chance of a cut by October and a near 80% chance of a cut by December.<\/strong><\/p>\n

Technical Perspective<\/strong><\/h2>\n

\"USD<\/a><\/p>\n

The ongoing rally in USD index which has been framed by a bullish channel over the last twelve months is starting to show signs of a potential reversal. Along with the bearish RSI divergence which has been flagged over the last move higher, the index failed to close above the recent 98.27 resistance and is stalling mid-channel. The recent bearish weekly pin bar at highs is also a red flag. If we do see a move lower, the key level to watch will the bull channel low ahead of important structural support at the 95.37 level. A break of this could see a much deeper, longer-term move in USD.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex The ongoing trade war between the US and China is causing grave concerns among investors following warnings from global central banks and the IMF alike. Now, leading investment banks are starting to sound the alarms. Over the weekend, US banking giant\u00a0Goldman Sachs issued a note to clients\u00a0warning them of the growing risk of […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-153384","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/153384","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=153384"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/153384\/revisions"}],"predecessor-version":[{"id":153395,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/153384\/revisions\/153395"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=153384"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=153384"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=153384"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}