The summary of the Goldman Sachs memo on stock market volatility was:
- Goldman warns that stock market sell-offs may affect GDP growth.
- Each 10% decline in the stock market is expected to reduce GDP growth by about 45 basis points.
- A 5% decline in stocks and a 21 basis point decline in 10-year Treasury bond prices could reduce GDP growth by 12 basis points over the next year.
- Including the movements of other assets, the total impact may be about 85 basis points.
- 20% sales will be needed to push the economy into recession.
- Further market declines may affect the Fed's monetary policy decisions
- Goldman says that the Fed is unlikely to intervene with the current S & P 500 index falling by 7% from a record high.
- Some commentators are calling for an emergency interest rate cut, but Goldman says that there are no serious market disruptions yet, although market pressures are noticeably higher than a week ago.
