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Goldman Sachs calculates a worst-case recession forecast as investors dump stocks and crypto

·3 min read

Stocks limped across the finishing line on Friday to close lower for a sixth consecutive week, a losing streak as bad as any that investors have seen over the past decade.

As gutting as that sounds, Goldman Sachs figures things could get worse. Much worse.

In a note to clients, the investment bank's equities team calculated twin full-year forecasts for the S&P 500.

The base case is for the benchmark to close out 2022 at 4,300, a near-7% premium over Friday's close. This assumes Corporate America will be able to eke out profits as they adapt to a coming slowdown.

The worst case is far bleaker. It involves a full-on recession slamming the U.S. economy, and that would mean stocks falling a further 10% to close out 2022 at 3,600.

Lloyd Blankfein, Goldman's former CEO, and current senior chairman, appears to be banking on the latter scenario. On Sunday, he told a Face the Nation interviewer that there's a “very, very high risk" the American economy will slump into a recession.

The pessimistic calculations are adding further volatility to a risk-off market.

At 3:30 a.m. ET Monday, global stocks and U.S. futures were awash in red with Nasdaq futures down by more than 1% (after climbing 3.8% on Friday). Meanwhile, the safe-haven dollar was climbing again, adding to its impressive gains against rival currencies.

View this interactive chart on Fortune.com

Baked into Goldman's downbeat forecast is the belief that economic growth will falter in the world's most advanced economies.

Over the weekend, in a separate report, Goldman's chief economist Jan Hatzius downgraded 2022 and 2023 U.S. GDP growth.

Hatzius's team now sees the U.S. economy growing 2.4% this year (previously, they'd calculated 2.6% growth) and a lackluster 1.6% next year (vs. 2.2.% for full-year 2023).

The economy is in for a big hit this quarter, Hatzius says, with COVID and Russia's invasion of Ukraine pushing up prices, snarling supply chains and sapping consumers' spending power. Hatzius, it should be noted, did not mention the R-word in his team's report.

Global stocks, Bitcoin sink

Across the Atlantic, the Europe Stoxx 600 opened at 0.6% lower, and stocks in China were weaker.

At 3:30 a.m. ET, the Shanghai Composite was off 0.3% following a dump of lousy economic data that confirmed the acute cost of Beijing's most recent COVID restrictions in the financial capital.

Sticking with risk assets, investors are selling out of crypto once again. Bitcoin tumbled below $30,000 on Monday, a 5% drop. Ether was also down by roughly the same percentage.

Looking ahead, it's a packed week for economic data and earnings. Wall Street will be tuning into tomorrow's retail data numbers to see if the consumer truly is holding back on spending. Meanwhile, on Tuesday and Wednesday, investors will get the latest quarterly results from retail giants Home Depot, Lowe's, Walmart and Target.

This story was originally featured on Fortune.com