A Golden Voice Cries Out: "Recession!"

If you ask me, the more people who think we will have a recession, the better. But more on that in a second.

Brokerage extraordinaire Goldman Sachs (NYSE: GS  ) now agrees with those who think recession is on the menu for 2008. Being able to shuck and jive through the turbulent credit markets doesn't mean the firm is omniscient, but let's assume it has a decent handle on what's going on.

Goldman's chief economist, Jan Hatzius, said earlier this week that the U.S. might be in a recession already, and if it's not, it will fall into one by this year's second quarter. He also said he expects the downturn to be modest and that growth will resume by the end of the year.

I notice two factors here. First, about interest rates: Hatzius suggested the weakening economy would force the Fed to act and bring down the federal funds rate another 1.75% from today's 4.25%. Yesterday, Fed chief Ben Bernanke stepped up to indicate that the Fed is prepared to cut rates as necessary to prop up the economy. Second, let's not forget that what Goldman says and what the government does may not be all that far apart. After all, Treasury Secretary Hank Paulson is a former CEO of Goldman.

What's important is that the more agreement we get on the reality of a recession, the better. While recessions are bad for companies, expectations of recessions are bad for stocks. The further we get from analysts projecting recession for the future and the more we plunge into actual recession, the faster we'll see stocks start to recover. Crazy, I know.

Along with the economic outlook, Goldman also updated its sector outlooks. It suggested overweighting health care, consumer staples, energy, and utilities and holding off on consumer discretionary, financials, industrials, materials, and tech.

In other words, stock up on Coca-Cola (NYSE: KO  ) and Merck (NYSE: MRK  ) , and stay away from the likes of Merrill Lynch (NYSE: MER  ) and Target (NYSE: TGT  ) . I'm sure they wouldn't suggest avoiding Goldman Sachs stock!

More financial Foolishness:

Read/Post Comments (0) | Recommend This Article (10)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 558089, ~/Articles/ArticleHandler.aspx, 8/24/2016 3:52:07 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,480.70 -66.60 -0.36%
S&P 500 2,172.68 -14.22 -0.65%
NASD 5,216.40 -43.68 -0.83%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/24/2016 3:36 PM
GS $165.14 Down -0.94 -0.57%
Goldman Sachs CAPS Rating: ***
KO $43.80 Down -0.05 -0.11%
Coca-Cola CAPS Rating: ****
MER.DL2 $11.64 Down +0.00 +0.00%
Merrill Lynch & Co… CAPS Rating: *
MRK $62.66 Down -0.92 -1.45%
Merck and Co. CAPS Rating: ****
TGT $71.75 Up +0.70 +0.99%
Target CAPS Rating: ***