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Goldman Sachs slashes U.S. GDP forecast, warns of recession risk

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Yahoo Finance Live anchors discuss Goldman Sachs Senior Chairman Lloyd Blankfein’s U.S. recession warning.

Video Transcript

BRIAN SOZZI: Now if you're looking for negative sentiment, Julie, you've come to the right guy because I have that for you. Now here are three things you need to know right now. Be ready for a recession. That's the stark warning from Goldman Sachs senior chairman and former CEO, Lloyd Blankfein, who said Sunday there is a, quote, "very, very high risk for a US recession." This comes as Goldman's chief economist Jan Hatzius slashed his US growth forecast for this year in 2023, following recent turmoil in the markets.

Meanwhile, Goldman's chief US equity strategist David Kostin took his year-end S&P 500 target down to 4,300 from 4,700. Talk about bad things come in three here, guys, from Goldman Sachs. But I really would point to Blankfein's comments first and foremost here. This is the first big bank CEO to come out and warn about a recession. I would argue Jay Farr last week, Rocket Company's CEO, told us he is banking on a recession. But when you get Lloyd Blankfein here, which is, he's still connected to the markets and plugged into what's happening, when he calls a recession, that's a big worry.

JULIE HYMAN: Well, he's sort of calling a recession, but he's also just saying, be prepared for the worst, which is also sort of good chief executive advice, I suppose, right? Be prepared for the worst. He said we could avoid a recession, but if you're running a company, you want to be in a good position if we are going into a rocky period.

BRAD SMITH: And really bringing into the conversation the supply chain headwind that still lingers right now, noting that while some inflation will go away, supply chains bringing that back in. And then additionally, you've still got the COVID lockdowns in China that's certainly impacting the broader kind of globalization restart effort, even, to make sure that there is some of that supply chain that gets ultimately resolved.

But I think at the end of the day, one of the other things that he mentioned, some of these things a little bit stickier. Energy prices-- that particularly continuing to be one of those shocks, price shocks for consumers, as well as businesses that really have to monitor their energy spending as well.

BRIAN SOZZI: He should have mentioned deli meat prices. My brother just called me this morning, paid $12.99 a pound for salami. I mean, it's ridiculous out there.

BRAD SMITH: It was eggs last week.

BRIAN SOZZI: Eggs, this week, salami. I told you I'd be coming with something new. Hold on. Let me add this, Julie, too.

JULIE HYMAN: Yes, please, please.

BRIAN SOZZI: Let me go to Kostin's note because I think that is alarming. Now the headline here is that he slashes--

JULIE HYMAN: David Kostin--

BRIAN SOZZI: David Kostin--

JULIE HYMAN: --who's a strategist at Goldman Sachs.

BRIAN SOZZI: --the chief strategist at Goldman. Now he cut his S&P target of 4,300, but buried in his note, said if we're going into a recession, you could see S&P 500 3,600. So that's a further drop from here.

JULIE HYMAN: Yeah, and that's after Jan Hatzius, who's the chief economist at Goldman Sachs, cut his GDP forecast. 2.4% this year is now what he's expecting. And 2023 is going to 1.6%. Oh, and by the way, our buddy, Mike Wilson, over at Morgan Stanley--

BRIAN SOZZI: On this show.

JULIE HYMAN: Do you think-- you think he came out with a super bullish note?

BRIAN SOZZI: Nope.

JULIE HYMAN: No. Mike Wilson is yet more bearish now, while you've got Kostin saying-- what's the number that Kostin put it at?

BRIAN SOZZI: 3,600 if there is a recession.

JULIE HYMAN: Well, Morgan Stanley's Mike Wilson coming out and talking about we could see a slump to as low as 3,400. He says valuation in technical support would be at that level. And then he said we'll get to 3,900 by next spring. And by the way, I don't think that he is baking in a recession to that scenario. I think he's saying this is going to happen even if we don't enter a recession.