Interview, Fireside Chat
Goldman Sachs CEO David Solomon on the economy, markets and the firm's performance
- Economic recession risks have softened since mid-2023, with a soft landing or shallow recession anticipated alongside 1.3% growth in 2023, though uncertainty is expected to persist due to a resetting economic construct.
- Inflation is predicted to remain stickier and harder to control than previously expected, potentially stabilizing at three to four percent for an extended period, with a two to two and a half percent target viewed as very difficult to achieve.
- Monetary policy will likely require aggressive, rapid tightening to curb inflation, resulting in terminal interest rates exceeding the current market expectation of just over 5 percent, which will remain elevated for a longer duration.
- The cooling of the economy is projected to be a prolonged process comparable to the middle of a nine-inning game, making it difficult for the Fed to check inflation while maintaining very low unemployment levels.
- Global businesses are expected to operate with increased caution, paring back capital spending and delaying strategic decisions until a clearer trajectory is established, while small businesses face wage pressures and limited flexibility.
- Capital markets activity, including investment-grade segments and a shadow backlog, is forecast to begin picking up in 2023 as sentiment adjusts to current valuations, though full market adjustment regarding equity and debt sales is expected to take four to six quarters.
- Significant headwinds to growth will persist, including inflation, geopolitical tensions specifically regarding the U.S.-China relationship, and ongoing cyber security risks requiring continuous adaptation.
- Long-term growth drivers include advancements in med tech, biotech, healthcare, and new AI technologies that will reshape workflows, alongside a complex transition to clean energy requiring decades and cooperation between the West and China.
- Goldman Sachs intends to finance fossil fuels for the foreseeable future while simultaneously investing in transition technologies, aligning with policy shifts that view energy supply through the lens of security.
- The firm plans to grow its asset management and wealth platforms, targeting $10 billion in asset management fees by 2024, while providing investors with clarity on growth trajectories and progress toward consumer platform profitability.
- Strategic focus will remain on medium to long-term franchise strengthening and shareholder value creation rather than quarter-to-quarter results, acknowledging that current conditions represent a transition where outcomes are often better or worse than general sentiment suggests.