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Published: Aug 10, 2022 3 min read

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Stocks popped in the aftermath of Wednesday’s better-than-expected inflation data, but that hardly means investors are in the clear. New analyses predict that the stock market could plunge once again if the economy enters a recession.

In a research note this week, Goldman Sachs analysts led by Chief U.S. Equity Strategist David Kostin laid out two different forecasts: one if we have a recession, and one if we do not.

If we manage to avoid a recession, Kostin predicts the S&P 500 — an index commonly used as a benchmark for how stocks are performing overall — will end 2022 at 4,300 points, down roughly 10% from the beginning of January and up about 2% from the index’s level at midday on Wednesday. That forecast is based on relatively strong company earnings, which haven’t been stellar but are surpassing analysts’ expectations.

If a recession does come to pass, however, the analysts say the S&P 500 could plunge to 3,150 — an eye-watering loss of 34% for the year. (For context, in June the S&P 500 officially entered a bear market — dropping at least 20% from a recent high — and the S&P falls by an average of 35% in a typical bear market.)

Analysts at Morgan Stanley are predicting even greater losses in the market this year if there's a recession. They’re forecasting the S&P 500 will fall to 3,000, according to a recent Bloomberg report.

Are we headed for a recession?

Goldman’s experts say there’s about a 30% chance that the United States enters a recession over the next year, but there are a variety of opinions on the matter. Some say we’re already in a recession, while others — including members of the Biden administration — are adamant that a strong jobs market means a recession is not in the cards, at least for now.

The economic numbers from June “do not seem to indicate a recession,” according to a recent blog post from the Federal Reserve Bank of St. Louis. And the committee at the National Bureau of Economic Research, which is tasked with making the official call about whether we’re in a recession, has not done so.

Recession or no, the volatility in the stock market this year, and the likelihood of more volatility down the line, mean it’s probably a good idea to check in on your portfolio.

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