Displaying items by tag: GDP
Yes, you read that right, Bank of America is forecasting a 35%+ GDP fall for the YEAR, not just Q2. The bank thinks the Coronavirus downturn is so bad that the US economy will shrink 7% in Q1, 30% in Q2, and 1% in Q3, a cumulative 35.55% for the year. The downturn would be the worst to ever strike the US.
FINSUM: This is by far the bleakest projection we have seen. Goldman, for instance, sees 19% growth in Q3. So if the economy shrinks 35% this year, what is fair market value for the S&P 500?
Goldman Sachs issued a bleak revision of its earlier estimate for the looming second quarter recession. When the pandemic first struck, Goldman called for a 9% decline. It then proceeded to increase that forecast to 20% as the lockdowns began. Now it has reissued guidance, calling for a 34% decline in GDP and a rise in the unemployment rate to 15%.
FINSUM: This is a profound forecast and speaks to the scale of the pending downturn. The good thing, though, is that Goldman thinks there will be a 19% recovery in Q3.
The forecasts for growth have been reverberating through markets. When this whole crisis started, Goldman Sachs initially said there would be a 5% drop in GDP in the second quarter. Oh how delightful that sounds now. Things have escalated considerably since then. Here is a smattering of various Q2 GDP forecasts: Goldman Sachs at 24% decline, Morgan Stanley at 30%, and the St. Louis Fed at a whopping 50% decline.
FINSUM: We think it is safe to assume that the GDP decline in Q2 is going to massive. So much so that the actual figure matters much less than the pace at which the economy bounces back thereafter. Is it going to be a V-shaped recovery, or a U, or the dreaded “L-shaped” recovery?
Goldman Sachs has put out some very concerning forecasts this morning. The bank thinks US GDP is going to shrink massively in Q2, down 5%. Goldman also thinks the S&P 500 won’t find a floor until it hits 2,000, another ~25% below current levels. The bank also believes 50% of Americans will contract the virus and that “peak virus” will occur within 8 weeks. Despite the gloomy predictions, the bank contends the markets will recover quickly in the second half of the year, with the S&P 500 rising back to 3,200.
FINSUM: This seems like a realistically bearish call on what is happening, with a very bullish medium-term outlook. Our gut instinct is that this seems a good prediction.
Stock across the developed world went into freefall today as news spread of the explosion of the coronavirus in Europe and the subsequent quarantine that has been put in place in Northern Italy. Additionally, US data shows business activity contracted for the first time in four years in February. The S&P 500 and Dow are both down about 3.4% at the time of writing.
FINSUM: The virus is now no longer contained to China, with Italy sporting 150 cases and three deaths. Chip companies, travel and tech are getting hit the hardest.