Goldman Sachs Predicts Recession: Will the Fed Cut Rates Again?

Wednesday seemed to be another sea of red for the markets, and helping to push that was recession commentary from Goldman Sachs. The biggest US Investment Bank outlined its position for 2008 and it wasn't a pretty picture. The company expects the US to slide into a recession in the 2nd half of 2008 citing a rise in unemployment and the current housing crisis spilling over into the economy.

The firm revised its "preferred" holdings weightings lowering financials and information technology percentages while increasing health care and consumer staples weightings. While stocks slid for most of the day, an end of day buyers rally seemed to shift focus from recession talk to over-sold bargain hunting. Many fundamentally solid companies, seeing their market caps eroding over the previous weeks, were bid up towards the end of day. Google (GOOG) was just one strong example of this as the company continued its recent slide, hitting as low as $622 but finishing up over $20/share to $653.

Volatility is the name of the game as it has become a trader's month. The Federal Reserve will come into focus soon enough as Ben Bernanke speaks Thursday. Traders will focus on anything economy related, specifically pointing to troubling times, as this will give the market hope for another rate cut come the end of January Fed meeting. The market is likely to expect a 50 basis point cut given current metric declines in employment and housing.