Goldman Sachs reportedly has warned investors to protect themselves with “high quality” stocks, as many clients are telling the firm that a U.S. economic recession is coming as soon as 2020.
“Investors should increase portfolio defensiveness given our forecast for heightened risk and fat tails,” Goldman Sachs analyst David Kostin said in a note on Friday, CNBC reported.
A “fat tail” is a way Wall Street describes a larger than usual amount of risk.
Kostin said that “scores” of Goldman Sachs’ recent meetings with clients “indicate that many investors believe the US economy will enter a recession in 2020.”
Goldman suggests “high quality” stocks with qualities such as strong balance sheets, high return on equity and consistent cash flow. Alphabet, PepsiCo and Mastercard are among the stocks it considers to be “high quality.”
However, others are much more optimistic.
Council of Economic Advisers Kevin Hassett said he is willing to bet, based on the economy and indicators, that there will not be a recession any time soon, even though the markets have fluctuated a great deal this year.
"The U.S. economy is booming," Hassett told Fox News' "America's Newsroom." "We got data on Friday that jacked up our growth estimate for the fourth quarter all the way above 3 percent. We're rocketing along at 3 percent growth, and the markets haven't reflected the good news."
Meanwhile, Hassett said that he would "take that bet" that there is not a recession coming in the next year.
"The economic data is really strong," he said. "We have enough data so we're highly confident this quarter is around 3 percent and [here will be] a massive amount of momentum in the next year. The growing incomes will feed through to consumption and spending on cars and capital formation for the firms to make more cars."
Further, one of the best indicators is from the Federal Reserve Bank of St. Louis, said Hassett, noting that the latest read is "the probability of recession over the next 12 months is zero."
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