How close is a US recession?

 # # --------------------------------------------------------------- Hello. It's Thursday, August 4. Forget Web 3.0; say hello to BRIEFINGS 2.0. Your favorite GS newsletter had a makeover to provide you even more insights on the trends shaping markets, industries and the global economy. This week we have analyses[on U.S. recession risk]( and a surprise jump in renewable stocks, as well as insights from our podcasts on [Asian workforce representation]( and [entrepreneurial success stories](. Dive into some of the top intelligence from Goldman Sachs below. Oh, and [we have a quiz.]( Good luck! (Was this newsletter forwarded to you? [Sign up now.]( --------------------------------------------------------------- Has the U.S. Economy Slowed Enough to Contain Inflation? [CEO business confidence has fallen compared to economic activity in 2022]( Signs that the U.S. economy is slowing are increasing. A key question is whether it has decelerated enough to bring down inflation [without tipping into recession](. - While GDP was reported to have shrunk for a second consecutive quarter, it would be “strange” to classify the first six months of the year — a period marked by a [booming job market]( — as a recession, says David Mericle, chief U.S. economist in Goldman Sachs Research. - The economy is undergoing a necessary slowdown to bring supply and demand into balance but probably hasn't tipped into recession, Mericle says: “Thanks to the fiscal and monetary policy tightening that has already been delivered or signalled this year, it appears that we're now on the desired trajectory.” - Data suggests the economy is running below its long-term potential and the labor market is rebalancing, although it has further to go, Mericle says. There still hasn't been “convincing progress” on containing wage growth and inflation. - Avoiding a downturn is far from certain: Goldman Sachs economists see elevated recession risk over the next two years. They expect the Federal Reserve to slow the pace of rate hikes to 50 basis points in September and 25 basis points in November and December, after raising the fed funds rate by 75 basis points last month, eventually topping out at a rate of 3.25% to 3.5%. [To learn more about the likelihood of a recession in the US, read the full interview.]( --------------------------------------------------------------- Why Renewable Stocks Jumped 18% in July Clean energy stocks soared after news emerged that the Democratic majority in the U.S. Senate appeared in agreement on a legislative package that would set aside roughly $370 billion over 10 years for climate and energy programs.  The Goldman Sachs U.S. Renewables Basket of stocks has risen about 18% over the past month as of Aug. 1 and outperformed the S&P 500 Index by more than 10% when the news of the agreement, part of the Inflation Reduction Act, broke. The custom basket is made up of U.S.-listed companies, from electric-vehicle makers to energy-storage companies, that stand to benefit from a transition towards cleaner energy. Renewable stocks outperformed the broader market in July About 90% of the stocks in the U.S. Renewables Basket posted results in the most recent quarter that beat earnings-per-share estimates, according to Louis Miller, global co-head of the Equity Custom Basket business in the Global Markets Division. While the details haven't been finalized, the spending bill is expected to become law, according to Goldman Sachs Research. The agreement is anticipated to have little fiscal impact, as new spending and new taxes roughly offset each other and are fairly small in absolute terms. --------------------------------------------------------------- Forerunner Venture's Eurie Kim Talks Consumer Trends [Eurie Kim of Forerunner Ventures and Goldman Sachs' Katie Koch]( Above (L to R): Eurie Kim of Forerunner Ventures and Goldman Sachs' Katie Koch. In the latest episode of [Exchanges at Goldman Sachs: Great Investors]( Eurie Kim, a managing partner for Forerunner Ventures, a venture capital firm that focuses on investing in a broad range of consumer-related companies, spoke with Goldman Sachs' Katie Koch, chief investment officer of Public Equity in Goldman Sachs Asset Management, about the evolution of consumer businesses, her investment philosophy and the dislocation between private and public market valuations. Kim describes herself as having an entrepreneurial “bug” that has driven her to grow and take chances. Earlier in her career, she launched her own luxury handbag company. However, it was the tragic loss of her father that made her change course and follow a different path. Still, she never stopped being an entrepreneur, though she warns it's not for the faint of heart. “Entrepreneurship today is glorified in so many ways,” she tells Koch. “It's a grind and it requires you to really become a different person…if you want to be an entrepreneur, it needs to be your priority.” The entrepreneur in Kim helped build out a venture capital firm when she partnered with Forerunner Venture's founder Kirsten Green. This is where her expertise in investing in consumer businesses really developed as Kim and Forerunner were early investors in a number of brands, such as Bonobos and Warby Parker, which also used social media to build a fan base. “Ten years ago, the opportunity that we saw was not necessarily one where it was about the brands specifically coming to market but rather that there was a new distribution channel. And this was driven by Facebook and ultimately social media at large,” she said. That evolution hasn't stopped and opportunity still exists, according to Kim. When it comes to investing, distribution channels and connections with the consumer are continually changing. “I think where we spend a lot of time thinking is, 'Where is the consumer at?' That's always been the drumbeat or the heartbeat of Forerunner from the very beginning…The burden is high on companies to meet us where we are.” So what's next for the consumer? “Today, when we think about new brands coming to life, it really is more of a, ‘How is this brand representative of an experience?' So it's not just a product, but it's a service. It's an ongoing relationship with customers.” Does that mean there will be opportunities in Web 3.0 or the metaverse? Kim says it's “exciting…but it's still very early.” [Learn more by reading the full interview.]( Subscribe wherever you get your podcasts [Spotify]( |  [Apple]( |  [Google](  | [Stitcher]( --------------------------------------------------------------- Asian Americans Still Underrepresented in Top Jobs The Asian American community has seen marked success in education, income and innovation, but remains underrepresented in managerial and executive positions, according to Goldman Sachs Research. In the[ latest episode of Exchanges at Goldman Sachs]( Hui Shan, chief China economist, and Daan Struyven, senior global economist, sat down with host Allison Nathan, to discuss their latest research, [Asianomics in America: Contributions and Challenges]( and the role that companies and policymakers can play in creating a more equitable and inclusive future. - This population has an outsized impact on the U.S. economy. Asian Americans are estimated to have contributed around a quarter of total growth in output of the U.S. private sector over the last 15 years, according to GS Research. “If you look at the numbers in absolute value, it's a very large number with a total contribution of around $1.5 trillion in current dollar terms contributed by the Asian American community,” Struyven says. - Asian Americans' underrepresentation in senior management and leadership positions is large and persistent. Asian Americans account for about 13% of professional positions in large U.S. firms but represent only about 6% of top senior management positions. “Some of this gap does reflect some observable differences like the younger age on average of Asian Americans throughout the population average. But these observable differences cannot explain the full seniority gap,” Struyven says. - The diversity of Asian Americans should be considered in policymaking. Asian Americans encompass different ethnicities and occupation levels in the economy and society. “We have to be more thoughtful about who we're talking about. It's not just the Chinese American challenges, but also when I look at the data, what about the Pakistani American challenges?” Shan says. “When we think about policymaking, when we think about addressing some of the issues, we have to be mindful about this diversity aspect.” [Listen to podcast]( I  [Read report]( --------------------------------------------------------------- BRIEFINGS Brainteaser: Question Tie-m For this week's BRIEFINGS Brainteaser, which country recently encouraged workers across public and private sectors to stop wearing ties in order to save energy? A)  Mexico B)  Australia C)  Nigeria D)  Spain [Check the answer here.]( --------------------------------------------------------------- ICYMI: In the Media [Bloomberg](#) August 3 [Goldman's Maasry on Emerging Markets OutlookÂ]( [CNBC](#) August 1 a bigger differentiation between China's weaker and stronger developers, says Goldman Sachs](  (2:48) [Forbes](#)  August 1 [Goldman Sachs' CEO David Solomon weighs in on the state of America's small businesses, markets and more](  🔒 [CNBC](#) July 28 [Investors should focus on big picture and stay invested, says Sharmin Mossavar-Rahmani]( (05:15) --------------------------------------------------------------- # # --------------------------------------------------------------- Some of the images used in this newsletter are sourced via Getty Images. The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. Goldman Sachs believes the data in this newsletter is accurate, but does not verify its accuracy independently and does not warrant or guarantee that it is accurate or complete. Goldman Sachs has no obligation to provide any updates or changes to the data. No investment decisions should be made using this data. To the extent this newsletter includes material from the Goldman Sachs Global Markets Division, please [click here]( for information relating to Global Markets Division material and your reliance on it. To the extent this newsletter includes material from Goldman Sachs Asset Management, please [click here]( for additional disclosures. © 2022 Goldman Sachs, All rights reserved. 200 West Street, New York, NY 10282, USA --------------------------------------------------------------- [GS.com](#)  | [Careers Blog](#)  | [Privacy and Security](#)  | [Terms of Use](#) [Twitter](#) [Facebook](#) [Instagram](#) [Youtube](#) [Email](#)