Jan Hatzius, Goldman Sachs’ chief economist, is warning that a default or near-nonpayment on U.S. debt could plunge the economy into a recession and spark market mayhem. “That is the worry: That you get turmoil in financial markets, a big tightening in financial conditions, and that adds to downward pressure on economic activity,” he said. Experts said that after hitting the $31.4 trillion borrowing limit last week, government officials are forced to take extraordinary measures to prevent a default, such as cuts to investments in retirement plans and the Government Securities Investment Fund. At the same time, Morgan Stanley’s Michael Wilson is warning investors that the stock market could soon see more losses due to an “imminent” earnings recession.
Business Insider/Zahra Tayeb
A US debt default or even a near-nonpayment could plunge the economy into recession, top Goldman Sachs economist says
A US debt default or even a near-nonpayment could spark a recession in the economy, according to Goldman Sachs’ top economist.
“That is the worry: That you get turmoil in financial markets, a big tightening in financial conditions and that adds to downward pressure on economic activity,” Jan Hatzius said in a Wednesday CNN interview.
The US hit the $31.4 trillion borrowing limit last week, forcing the Treasury to step in with extraordinary measures to prevent a default. The steps include cuts to investments in retirement plans and the Government Securities Investment Fund.
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Fox Business/Megan Henney
‘Imminent’ earnings recession could tank US stocks, Morgan Stanley warns
The U.S. stock market could face even steeper losses in the coming weeks thanks to an “imminent” earnings recession, according to Morgan Stanley strategists.
Michael Wilson, the chief U.S. equity strategist at Morgan Stanley and a longtime Wall Street bear, warned in an analyst note this week that incoming fourth-quarter corporate earnings reports are likely to disappoint investors this week, sending stocks to a two-year low.
“We’re not biting on this recent rally,” Wilson wrote.
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