Not all are in the clear. The likelihood of contraction is 42 percent in Japan for the next four quarters and 62 percent over two years. Oil-rich Norway’s chances top 80 percent in both cases.
Goldman Sachs isn’t completely bullish. It last week said it now expects the Federal Reserve to raise its benchmark interest rate next in June rather than March and last week cut its 2016 forecasts for 10-year bond yields in the U.S, Germany and Japan.
So how to align the markets with the model? Goldman Sachs notes in the case of the U.S., several past panics failed to trigger a recession.
Among them, the 1987 stock market crash, 1994 bond market selloff, 1998 collapse of Long Term Capital Management, 2002 blowout in corporate credit and 2011 euro-area debt crisis.
“In each case, at least some financial markets were priced for significant recession risk,” the economists said in the Goldman Sachs report. “This created significant investment opportunities for investors willing to adopt a more constructive view.”