Research Team at Goldman Sachs, suggests that the concern about spillovers from a potential foreign shock is in a key factor behind both US recession fears and skepticism about further Fed hikes this year. Key Quotes “We look back at how the US economy, financial conditions, and the Fed reacted to prior crises abroad. We draw three conclusions. First, the economic effects have been limited. While US exports suffered, corporate profits remained stable and overall growth was mixed, with a moderate deceleration seen in about half of the cases. n Second, financial conditions have tended to tighten in the near term, but have been more neutral in the medium run, with dollar appreciation offset by lower interest rates. Third, Fed policy has on average turned somewhat more accommodative following foreign crises. However, meeting records indicate that Fed policy responses were limited to cases where there was a sizeable threat of financial contagion, and this seems less likely today.” For more information, read our latest forex news.