25% chance of US recession next year: Goldman Sachs

Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS US jobless claims fall, Q2 productivty much weaker US desperately needs another big stimulus: Paul Krugman ALSO READ See what other FIIs are saying about the markets See what other experts are saying about markets See what Udayan Mukherjee is saying about the markets

Q: What about Europe? You refer to that in your report as well, how are you assessing the situation there?

A: People are too bearish about the European situation; people exaggerate still the importance of Greece and Spain and don't give enough importance to the likes of Germany and Italy. Germany and Italy, just these two together are 50% of the Euro area.

Germany is going to through by Germany's standards a boom, and in many ways the best international exposed country to the BRIC story because it's such a big exporter. Many European multi national companies (MNCs) are very well positioned to benefit from this. They have got attractive valuations. I don't really see what the big bear story is, and unless you really do believe that there's going to be contagion that drags down the whole European financial sector and I just don't see that.

Q: In the near-term, how do you think equity markets should now, given the reality that you just spoke about in the US and Europe? September-October traditionally have been tricky months for global equities, do you have a call on how things may pan out?

A: In this part of the world, there is a phrase, 'Sell in May, go away and come back on St Ledgers Day', which is named after a famous horse race in UK, which takes place at the end of the September. It links to a remarkable historical tendency for equity markets to do better between November and April and poorly between May and end of September. And that's certainly been the way this year, and linked to some more substantive, I mentioned the US mid-term primary elections.

I think part of the problem is influencing US economy and markets since May is the whole stance of Obama towards economic policy and particularly towards corporate behaviour and business. And I think this is an issue beyond the data is hanging over the US market, and it might well be so as we get beyond the November elections, that remains as issue.

Maybe some what controversially, but my view is that if you had a combination of Obama and the Republican Congress, that might mean a very different style of Obama leadership. In fact if u look at past evidence of when Congress has shifted mid-term , just as the sell in May and go away has got strong historical reliability, so has shifting mid-term control of the Congress.

I think if the republicans were to take back control of Congress after November, that might help the markets move in some more substantial permanent territory. It might remain choppy for the month of September because of uncertainties in the US, but it seems to me we do not have the basis for a permanent bear market as some people say. If you look at valuations, you look at the friendliness of not only US, but global economic policy, I think the environment is more conducive to a bull market, once we get beyond November.

Q: What about this part for the world, India, the BRICs universe, which you also keep a close eye on?

A: I think if you stand back and look at what India reported for Q1, 8.8% is a fantastic position that India finds itself in as with many other BRIC economies. Who would have dreamt that India would have had such a modest slowdown in 09 as it did, and here we are in the middle of the recovery period for the world where much of the developed world is struggling, and yet India appears to be showing signs that its growth trend is accelerating.

I think all credit goes to the private sector and Indian policymakers for what seems to me an environment where India growth trend may be improving, and getting towards Chinese type levels of growth. While one of the costs of that might be higher inflation than desirable, the RBI is doing its bit to try and tighten monetary policy, but I think broadly, India is very well positioned in this very changing world, in which the BRIC countries are becoming more and more important and India is looking in a good position to me.