Stock markets are in for a wild ride next year as they don't yet reflect the risk of a U.S. recession, according to strategists at Goldman Sachs and Deutsche Bank.
Stock markets are in for a wild ride next year as they don't yet reflect the risk of a U.S. recession, according to strategists at Goldman Sachs Group Inc. and Deutsche Bank.
Their calls are a warning after equities rallied sharply in the past two months on bets that a peak in inflation will lead to a softening of hawkish central bank policies. The Goldman strategists said that while monetary policy should become less of a headwind next year, slowing global growth will keep stocks under pressure.
Goldman's analysis shows that equities tend to rebound once inflation has peaked if a recession is avoided. In the event of a contraction, however, they decline another 10 per cent on average in the six to nine months after the peak. While they see US recession risk as relatively low, they noted that concerns over financial stability as well as market stress indicators -- such as liquidity risk and solvency risk -- has increased across asset classes.
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