Goldman Sachs has mixed confidence about next year's market and is warning investors to protect themselves with "high quality" stocks, as many clients are telling the firm that a U.S. economic recession is coming as soon as 2020.
"Investors should increase portfolio defensiveness given our forecast for heightened risk and fat tails," Goldman Sachs analyst David Kostin said in a note on Friday.
A fat tail is a way Wall Street describes a larger than usual amount of risk. Goldman Sachs expects the S&P 500 index will reach 3,000 by the end of next year, from about 2,600 this week. The firm assigns a 50 percent probability to that baseline scenario. But Goldman sees a 30 percent probability for its downside 2019 forecast of 2,500 and a 20 percent probability for its upside forecast of 3,400.