SPY - Don't Let Goldman Sachs' Recession Forecast Shake You Out of SPDR S&P 500 ETF Trust
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The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is known for reliably tracking the movements of the S&P 500 index. However, not every analyst is bullish on the S&P 500 — but you can still hold SPY stock with confidence.
Earlier this month, analysts/economists at Deutsche Bank (NYSE:DB), led by Matthew Luzzetti, deployed the dreaded “r”-word: recession. Specifically, they predicted that “a more aggressive tightening of monetary policy will push the economy into a recession.”
The Deutsche Bank analysts also posited, “We no longer see the Fed achieving a soft landing.” Apparently, they’re referring to the U.S. Federal Reserve’s monetary-policy tightening that’s expected this year.
Generally, investors expect the Federal Reserve to raise the federal funds rate in order to tamp down inflation. The most recent annualized U.S. consumer price growth reading was 8.5%.
Before you divest your account of SPY stock, however, take note of the Deutsche Bank analysts’ recession forecast timing. In particular, they’re expecting a mild recession beginning in the fourth quarter of 2023.
More recently, Goldman Sachs (NYSE:GS) Chief Economist Jan Hatzius grabbed the financial headlines with his own recession call. Much like the Deutsche Bank analysts, Hatzius cited “policy tightening.”
But again, let’s read the fine print. Hatzius also asserted that “strong economic momentum limits the risk in the near-term.” Moreover, the Goldman Sachs economist sees “the odds of a recession as roughly 15% in the next 12 months and 35% within the next 24 months.”
In other words, while monetary policy tightening is practically assured, a recession this year isn’t likely. A “soft landing” won’t be easy for the Federal Reserve to implement, but investors don’t have to panic now.
SPY stock, like the S&P 500, has survived many macroeconomic shocks. These have included the financial crisis of 2008 to 2009, as well as the Covid-19 pandemic.
Besides, if you’re a true contrarian, then times of peak pessimism should be viewed as a time to buy, not a time to sell. Of course, this is easier said than done, psychologically speaking. Yet, buying when Wall Street is jittery could pay off big-time, if you’re not deterred by the dreaded “r”-word.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content -and crossed the occasional line -on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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