Bloomberg Audio Studios, Podcasts, radio News. I'm Hardie Stradolz here in Sydney and we have a very special guest, a very special event here in Sydney this morning. It is the Golden Sacks Australia Week Alternatives and Macro's Summit, and with me here as a seer and chairman, David Solomon. Really great to have you with us, and I know you've been doing a lot of talking. We're about to make you do some more. Welcome to Australia. But of
course markets, wonderful to have you. Markets are really gripped by what's going on Roughly eight thousand miles away right the Middle East conflict is still front and center. We don't know how extended it's going to be. You said yesterday you were surprised Baha benign markets were Your team of strategists, led by Peter Oppenheimer, is saying, by the dear, do you see complacency at this moment?
I I don't see complacency. I just I think there's a lot of uncertainty around the direction of the conflict, how it will be resolved. You know what the off ramps are, and you know, I think it's fair to say when you're markets market reactions have been relatively benign, and I certainly could have seen over the last couple of days, you know, a little bit more volatility. But
I don't think people are being complacent. I think that market participants are looking and trying to say, you know, how is this going to play out?
What's the end game?
You can see you know, good scenarios and more difficult scenarios, and as they have more information in the coming days and the coming week or two, you know, I think that will have an impact on risk premiums. I think at the moment, what market participants are really looking at is is this going to translate through to things that affect economic growth and activity, particularly energy supply chains you
know so far. I think one of the reasons why markets are reacting the way they are is they're encouraged that there is you know, strong support for trying to ensure that doesn't happen.
But it's uncertain. You don't know, and we'll see in the long run.
For portfolio allocation, and I know Peter Oppenheimer, Charmin most of Barramari, it a call for our wealth clients.
You know, if you have portfolio allocation.
There's nobody that's say you should share your fundamental portfolio allocation because of what's going on. But for traders and day to day market participants to think about risk premia, you know, every single day.
Obviously they're watching very closely.
What a lot of people that run big, major global banks like yours, right, do you worry about the lack of predictability when it comes to policy, when it comes to how this potentially ends, and when it ends, what's going on with your at least operations.
For anxiety, I worry about a lot of things. We run a big global business. We have an extraordinary team, and you know, I think one of the things that we have to accept is the world as a very complicated place. There's always a lot of uncertainty. There's always a lot of nuance. But we have you know, base beliefs and how economies will perform, how the world will evolve, and you know, we operate around that. But we always are prepared to risk manage and think about downside risks.
And I think one of the things you have to do when you run a big, large financial institution is that when you know fact change or risk come up you've always got to.
Be prepared to pivot, to shift to de risk. And you know, we run our business, you know that way always.
We run a big balance sheet and we you know, we think about that every day. But there's there's nothing while these are very very significant events and I don't want to diminish them in any stretch. You know, we've operated the firm through lots of very significant events. You're in year out, and that's that's part of what we do.
Is it business is normal? Then for say, your offices in Saudi Arabia, is this travel going on? What's a communication with third clients?
That's that is complex.
We have We've got a significant number of people in you know, in those Middle East countries, and obviously, first and foremost we're concerned with their safety and you know we're trying to do everything we can to support them in their families. I would not say, you know, it's business as usual in those markets. You know, all those markets for all businesses you know are operating work from home and and you know stay safe as a first priority. And so we'll just have to watch closely, you know,
how things play out. And you know, we're very very focused on making sure our people and their families are safe and sound, and at the moment, that's our primary focus.
In that part of the world.
Do you think there is a bit of an existential cloud of buy as a financial center, now.
Well, you know, I do think safety and security, you know, matters, And I wouldn't say I think it's a little bit premature to talk about existential clouds. But you know, if you're living and operating in a place and you didn't anticipate this, it's quite scary and it's quite unsettling. And so, as I said, our primary focus is on the safety and security of our people there were working very hard to make sure that we're protecting.
Them and their families.
It's not as the background prior to this conflict was crystal clear, right, we just came off really trying to work out what the AI scare trade is going to be. Like, do you do think that when it comes to that narrative of sustainability of you know, I know, Jamie Dahmer said, there's some players doing dumb things, for example, does that still have further to go?
I'm not sure I understood the question exactly. Are you you're talking about kind of AI investment. You know growth. Look, AI is a fabulous, fabulous, incredible technology that is going to drive massive productivity gains through society. There's a lot of capital being deployed to grow AI capabilities around the world. Some of that capital is are going to get reasonable returns, some of that capital is not.
They're going to be winners, they're going to be losers.
As within any technology super cycle, I think we're early in that process, but I think it's exciting and I actually look at the.
Glass being half full.
That doesn't mean that there won't be capital that's burned companies that don't work out. But I think overall, the benefits to enterprise productivity, you know, the economy broadly as this technology gets developed and deployed is going to be quite exciting. And I'm looking at the optimism of you know, what's ahead from all this, and of course try to manage the risk of the downside, the speed bumps that will inevitably come along the way.
I like the earlier saige. You know, in your job, you will worry about a lot of things, right, Trade Tariff's US policies obviously one of them, And I think this is the first time we've spoken to you since the Supreme Court passed down their judgment. Does the further lack of predictability on trade policy? Is that also a concern when it comes to business sentiment, when it comes to your views on how the US economy is going to cope?
What? I think uncertainty does affect business sentiment broadly, But I just say I don't think that.
I don't think that at.
The moment, US trade policy is that uncertain, you know. I think this administration has been clear about how they intend to drive a trade policy. I think the Supreme Court decision affects a certain discharge of tariff's into the economy, but there's certainly other avenues for the president. I think the President's made quite clear, you know, how he thinks about tariff and trade. And I think while this administration is in place, that is going to be a construct
that we have to operate in. Of course, if there could be more, it can be more certainty around exactly how that looks. And I think the important thing is how it will look in longer perpetuity. You know, of course the market would appreciate that, but I think the market operates knowing that there's a level uncertainty around trade and trade policy that we just have to adapt to.
And we have to live with.
I wanted to get a bit more while you're here, for example, in beautiful Sydney, do times that use of increased global and certainty does it make a relatively more idiostromcratic market like Australia more interesting?
Well, Australia's always been interesting market.
We have four hundred people here, but a lot of very very important, you know companies in Australia. We have a good wealth business in Australia. You know, Australia is an important market and an important economy, not just for the world, but also for Golden Sacks. You know, any market, any economy that's important is important for Golden Sacks. Given our global footprint, I try to get here about once a year.
I try to do it around an event like this.
So we've got a lot of our clients bort together first of all for this conference. But this has always been, you know, this has always been an important market, an important economy for Golden Sacks, and you know, I think that's consistent, you know, in any environment. So I was here the same week last week, and I'm excited to be back again this year.
What else are you excited about around the region? Are there as a house view Goldmen Sex is very bullish on China or it's of course National People's Congress Week as well. What's your feel about that market given some of the crosswinds on trade, on tech, on geopolitics.
Is China is one of the largest China is one of the largest economies in the world. That's going to continue to be one of the largest economies in the world.
You know.
At the moment, I'm very focused on the bi ladder relationship between the US and China. I'm looking forward to President Trump's visit with President Chief that it's planned for later this month, the beginning of April. It'll be interesting to see what comes out of that, and you know, whether or not China and the US can make.
More progress, you know, on their biladder relationship.
I think that's important for growth in the world, and I think it's important for both the US and China, and I think at the moment that's fragile, and so I'm very curious to see, you know, how that progresses. In the meantime, Chinese markets have done very well in the last twelve months. That's increased capital flows, you know into the region. We obviously participate in that. But we're going to watch those bilateral meetings and progress in the Bilader relationship very closely.
What would you like to come out in terms of deliverables from.
I'd like to see, you know, more certainty and clarity around how the Biladder relationship will work going forward. I think there are things that the US wants and things that China wants. I'd like more clarity around what that's going to look like, you know, not just in twenty twenty six, but you know, over the coming years. And I think that's still relatively uncertain.
What are we not talking about enough? I know we've talked a little bit about private credit. You don't think it's a sort of a systemic risk at this point.
I think credit formation around the world is really correlated to you know, economic growth and economic activity. I do think that we've gone if I just look at the US market, which is obviously, you know, very when you talk about private credit, a very very large market. The context of private credit, We've got a long time without a credit cycle. We've gone a long time without a recession. I do think when you have these long dated cycles,
they're a variety of things that happen. One, credit spreads narrow, two lending standards.
People have more capital deploy they get.
Aggressive, lending standards deteriorate a little bit due diligent standards deteriorate, and so we're watching very closely to see if there's been a little bit too much aggression froftiness in those markets. But fundamentally, when you look at the underlying credit portfolios, particularly below investment grade credit, while there have been a bunch of idiosyncratic events where there have been problems, the
broad portfolios are performing reasonably well. Why are they performing reasonably well because the economy is doing fine and it's very hard to have broad underperformance and a broad diversified credit portfolio. If the economy is doing well. When we do have a slow.
Down in the economy, you will see it.
I think because of the length of the cycle, you probably will find places where the losses are higher than people expect.
We're very, very focused.
On back leverage and things that could affect or amplify in a more difficult economic environment, you know, credit deployment.
But at the moment when you.
Look broadly across portfolios. We're not seeing things that are super concerning. That's a completely different issue than retail participation and retail investors wanting liquidity from what are fundamentally illiquid products, and so that's getting a lot of attention. But that's
different than the underlying credit portfolios. But I do think that when there is a slowdown in the economy or we do get to a place where we have, you know, a recession, you're you're going to see losses and credit portfolios, and you know those losses could be meaningful, but you know, we'll watch that closely while the economy is chugging along. You know, that's that's not the primary focus.
David, I know we must let you go, but we really appreciate you giving us your time in a very very busy schedule. Thank you so much for joining us.
Absolutely great to be with you. Thank you for having me.
Also Common Sex chairman and CEO David Solomon here at the Australia Week event