Goldman Sachs warning: Investors still underestimating recession risks

U.S. investors are significantly underestimating the risk of a recession, potentially increasing the impact of a recession next year, economists at Goldman Sachs warned in a Monday research note, according to Bloomberg.

Researchers at Goldman estimate a 39% chance of a slowdown in U.S. growth, but risk assets only account for an 11% chance, Bloomberg reported. By underestimating the chance of a recession, investors are increasing their exposure to the effects of “recession scares” in 2023, the analysts warned.

While Goldman still considers the risk of a recession to be relatively low, the researchers noted that a variety of measures pointed to increased stress in asset classes marketwide, Bloomberg reported. Despite an increasing number of economists and financial executives predicting a recession within the next year, Goldman Sachs has previously pushed back on this narrative, MarketWatch reported in late October.