The S&P 500-stock index is down 9 percent since the start of the year on concerns ranging from negative interest rates to a hard landing in China. A new survey from Goldman Sachs Group Inc. shows that a growing proportion of its clients are worried about a global recession.
"Fund managers are fearful that negative animal spirits have taken hold in the global economy and a recession is looming," the note, sent out by Chief U.S. Equity Strategist David Kostin and his team, said. "More than one third of the clients attending our recent macro conference in Hong Kong expect cash will post the highest risk-adjusted return of any asset class in 2016. Nearly 60 percent of the participants forecast global equities will deliver a negative return this year."
Kostin and team don’t discredit the heightened concerns, but they do point out that consumers are still sending a number of strong signals that point towards a continued expansion.
"[Q]uantitative and qualitative measures of consumer activity suggest spending will continue and the current economic expansion will persist," the team continued. "Our high-frequency GS/TRE weekly retail sales index accelerated in February from the average last month."
The team said that the strength of the consumer should not be overlooked. "Many investors believe the economy is on the precipice of a recession. However, quantitative and qualitative measures of consumer activity suggest spending will continue and the economic expansion will persist."
So unless the consumer starts exercising more caution and spending decelerates, Goldman remains bullish on the global economy. The most recent retail sales numbers were relatively strong across the board, increasing for a third straight month in January, with 8 of 13 major categories showing increases in demand from the prior month.
It's worth noting that Goldman started the year with one of the lowest 12-month targets for the S&P 500, at 2100, but with a number of other firms lowering targets, Goldman is now near the front of the pack. Stocks would have to rise 13 percent to reach that target.