The outlook for the global economy, in one word, is “bleak.” In two words, it is “getting worse.” But now that forecasters are unanimously pessimistic and see only downside risks, it’s worth remembering that they often see only what is right in front of them—and painfully miss what may lie farther ahead. 

I was reminded of this while browsing the International Monetary Fund’s World Economic Outlook, released earlier this week. In its latest update, the IMF expects global economic growth to slow from 3.2% in 2022 to 2.7% in 2023 (recession territory), and from 1.6% to 1% in the U.S. Notably, the IMF’s projections over the past year got worse with every quarterly update.

To top it off, the IMF still sees only downside risks ahead: monetary policy mistakes; further appreciation of the dollar; more energy and food price shocks; widespread emerging market debt; halting gas supplies by Russia; a resurgence of COVID-19; a worsening of China’s property sector with spillover effects around the world; and geopolitical fragmentation preventing climate action.

If all or some of those downside risks materialize, the IMF warns, global growth could be the worst since 1970.

CEO Daily readers would be forgiven for running off now to prepare for worst-case scenarios. But before you do, let us remember that even the world’s best economists can get overly confident while being utterly mistaken.

One case in point, as Shawn Tully wrote in Fortune’s Quarterly Investment Guide yesterday, was the way Goldman Sachs and other Wall Street banks got the 2022 stock market “terribly wrong.”

Just as the IMF had to lower its global and U.S. economic forecast for 2022 four times in a row, Goldman Sachs recently revised its year-end target for the S&P 500 for the fourth time this year. “Goldman’s new estimate is 3600, a number that’s 29% below the 5100 mark it was forecasting as late as mid-February,” Tully noted.

Why was Goldman’s stock market prediction so far off the mark in early 2022? In short, it believed corporate profits would continue to rise, and real interest rates would remain negative. Those assumptions, Tully writes, weren’t so outrageous as they may seem now. But with some critical indicators already flashing red, Goldman’s optimism was nevertheless “cruisin’ for a bruisin’.” 

What does this tell us about the looming global and U.S. recession? Growth may well be as bad as predicted, of course. But just as we collectively can be overly optimistic, we can be overly pessimistic, too. Consequently, in volatile times like these, it may be wise to not just prepare for worst-case scenarios, but for best-case ones, too.

More news below.

Peter Vanham
@petervanham
peter.vanham@fortune.com

TOP NEWS

Musk and Ukraine

SpaceX has told the Pentagon it may stop providing Starlink satellite communications services in Ukraine unless the U.S. military starts funding them. A new tweet from CEO Elon Musk linked this decision to Ukrainian diplomat Andrij Melnyk’s recent suggestion that Musk “f*** off,” after the tycoon proposed a very Kremlin-friendly peace plan that would essentially amount to Ukrainian capitulation. “We’re just following his recommendation,” Musk said. But that makes little sense, as CNN reported SpaceX notified the Pentagon of its decision last month, before Musk revealed his peace proposal. CNN

Musk investigation

There’s no escaping Musk today. Twitter has said in a court filing that U.S. authorities are investigating Musk over “his conduct in connection with the acquisition” of the social-media firm. Correspondence shows the SEC had questions for Musk over his disclosures in the early days of the takeover saga. Financial Times

Kroger and Albertsons

The U.S.’s two largest supermarket operators may merge to take on the likes of Walmart. Given that Kroger and Albertsons operate in many of the same regions, there’s good reason to expect antitrust scrutiny for this deal, if it does appear. Wall Street Journal

AROUND THE WATERCOOLER

A $500 million superyacht anchored near Hong Kong reveals the world’s unwillingness to enforce the U.S.’s ‘heavy-handed’ sanctions against Russia, by Nicholas Gordon

Jamie Dimon is braced for stocks to go down another 30% in a really severe recession, by Alena Botros

Europe’s winter energy crisis will likely coincide with mild temperatures during peak heating months, climate model says, by Bloomberg

Companies are ‘hanging on to workers for dear life’ as employees continue to wield their power over bosses, by Chloe Berger

‘We need to be on the 700th Black woman starting a unicorn company’ instead of just a few, says the founder of Incredible Health, by Sheryl Estrada

This edition of CEO Daily was edited by David Meyer.