Mint Quick Edit | Goldman Sach’s outlook changes highlight global uncertainty

Concerns of a US recession reflected in investor sentiment which sent stock markets globally into nervous gyrations, India being no exception.
Concerns of a US recession reflected in investor sentiment which sent stock markets globally into nervous gyrations, India being no exception.

Summary

  • Goldman Sachs just scaled back the odds of a US recession after raising them barely a fortnight ago. The relief of possibly averting a recession aside, the divergent moves reflect economic uncertainty, which could hurt India too. A close watch is needed.

It’s a sign of the uncertainty looming over the global economy that economists are altering expectations so frequently. Take Goldman Sachs, which has just scaled back the odds of a US recession to 20% from 25% forecast a fortnight or so ago. 

That prediction had marked a spike from the 15% probability it had held until a weaker-than-expected July US jobs report unnerved observers in the US and elsewhere. 

The odds of a US recession are now halfway back to the level before that report came out, and a full retracement is probable if the August report due next month “looks reasonably good," Goldman Sachs says. 

Also read: Market outlook: Investors should prioritize value over growth stocks, says analyst

It attributes its eased worries to encouraging retail sales, although the debate over the gravity of the knock the US economy would take is not yet over. This has reflected in investor sentiment that has sent stock markets globally into nervous gyrations, India being no exception. 

Though its economy’s domestic orientation has traditionally shielded it from external headwinds, rising integration with the world economy has meant it can’t go unscathed. Troubles in the US and elsewhere would hurt its export prospects as also capital inflows. A close watch is needed.

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