Goldman Sachs issues recession warning as shares of Big Four US banks fall despite Credit Suisse shares rising 35% after Swiss National Bank offered $54 billion lifeline
- Pioneer bank says the chances of a US recession in the next 12 months are 35%
- That’s 10% more than his previous prediction; Shares of the big four have plummeted
- Credit Suisse appears to be on solid ground thanks to a $54 billion bailout
Goldman Sachs says the chances of a recession have skyrocketed after three US banks collapsed, Credit Suisse was handed a lifeline and shares of the ‘big four’ plunged.
The investment bank’s chief economist, Jan Hatzius, warned on Thursday that there is a 35 percent chance that the United States will suffer a recession in the next 12 months.
That’s dramatically higher than the 25 percent chance Hatzius made in his earlier prediction.
Hatzius is so far the only Wall Street economist to have raised the chances of a recession, but Goldman Sachs is known for keeping abreast of economic trends.
He also cut the economic outlook for the United States and predicts that GDP will fall between 0.3% and 1.2% for the next quarter.
Credit Suisse appears to have stabilized on Thursday morning after a $54 billion bailout from the Swiss government, but Goldman Sachs warned that the US now has a 35 percent risk of a recession in the next year.
The crisis has affected the so-called “big four” banks in the United States. JP Morgan shares fell 4.72 percent to $128.26 a share and Bank of America shares fell 0.94 percent to $28.49.
Wells Fargo shares have fallen 3.29 percent to $38.85 per share, while Citigroup shares have lost 5.44 percent of their value and currently sit at $44.82 per share.
Shares of crisis-hit Credit Suisse bank have soared 35% after Switzerland’s central bank offered the company a $54 billion loan.
Shares of the bank rose 5.56 percent in premarket trading to $2.28 after the lifeline news was shared.
That’s still well below the $2.49 per share price recorded on Tuesday, just before the bank was hit by the crisis that collapsed Silicon Valley Bank in the United States.
But Thursday’s gains are significant compared to Wednesday’s $1.76 a share price that raised fears the 117-year-old bank was on the verge of destruction.
The crisis comes after Silicon Valley Bank collapsed last Friday, followed by Silvergate Corporation and Signature Bank.
The Silicon Valley Bank collapse was the second largest in US history, just behind the Washington Mutual Bank collapse in 2008.
