What's going on?

Investment banks shared miserable economic growth forecasts this week, and drenched companies are bracing themselves for more storms ahead� but first, here�s Jerry with sports!

What does this mean?

Goldman Sachs was among the first to cut its economic forecasts for the US, admitting it now expects growth in the world�s largest economy to stall this quarter � and fall by 5% in the next � as companies and consumers alike cut back on spending. The recovery in growth it�s predicting later this year, meanwhile, will be too little, too late: Goldman thinks the US economy will only grow by 0.4% in 2020.


Morgan Stanley is even more downbeat: it reckons there�ll be a worldwide recession, even as global growth ekes out an estimated 0.9% annual gain (emphasis on the �eek�). That pessimism is likely to be vindicated by Germany�s latest investor survey, which showed investor confidence this month was at its lowest since the 2008 global financial crisis. And that dovetails with another of Goldman�s predictions: that Europe�s also headed for a recession this year.

Why should I care?

For markets: From economic growth to earnings growth.

According to TS Lombard, company profits (as measured by their �earnings per share�) have fallen compared to the previous year whenever annual US economic growth has dipped below 2%. And with debt repayments likely to be missed and unemployment likely to rise, TS Lombard is expecting history to repeat itself: it reckons profits this year could be 14% lower than in 2019.

The bigger picture: Known unknowns.

Most analysts believe economic activity will start to pick up again after April, and that greater access to �cheap money� should make growth in the second half of the year significantly higher than the first. Whether that actually happens, of course, depends on several unknowables, including the accessibility of coronavirus treatments, the effectiveness of government actions, and the speed post-pandemic life returns to normal � if at all.