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I'm delighted to speak to the Golden Sachs Chief executive David Solomon. David, thanks so much for joining us. First of all, welcome to Oslo, Norway. I know we'll talk about Europe, but we have to start with Trump policies. It's been one hundred days since the inauguration, Like where are we?
We've seen a lot of volatility. How would you describe this moment in time?
Well, first of all, thank you for having me, and it's good to be with you, you know, here in Oslo. Four one hundred days in, and I would say there are a handful policy initiatives that.
Are being put forward.
Some of them certainly are very very interesting and intriguing to the market. But what's been put forward on trade so far has raised the level of uncertainty very significantly. And so i'd say one hundred days in, we need another one hundred days to kind of see where the policy directives are going and to try to have a better understanding of how what's talked about so far, particularly with respect to trade, is ultimately going to be put
in place, how it's going to play out. But the policy actions to date have raised the level of uncertainty to a degree that I don't think is healthy for investment and growth, and I think it's going to be important that we get more clarity on the direction of travel from here.
For the markets.
So if you look at markets, there's been a sum off for pretty dramatic self in US assets, it's somewhat come back, but hasn't been too drastic.
Well, it's not just for the markets, you know, first and foremost, it's for businesses. It's for individuals. When there's a high level of uncertainty, people tighten the belt, they invest less, they spend less, and all those things slow down growth. And so you know, one of the things that has happened over the course of the first one hundred days is that the perspective on forward growth has been decreased. And so when you decrease that perspective on
forward growth, that changes investor's perspective of equity values. So what we've seen is a relatively orderly kind of repricing of equity assets. And what's unusual on the context of this we're pricing is generally when you have that kind of equity market stress, people run to treasuries or safe haven. But here we're seeing a slightly different rotation because of the.
Nature of the policy.
We've seen a weakening of the dollar, you know, at the margin, and so that's been different than I think what people expected.
Our treasury is still safe haven.
I think US treasuries absolutely are safe haven, but you can reprice a safe haven asset as people's preferences shift slightly, you know. I think at the margin, we've had for a long period of time a trend of capital flows into US assets, and you know, at the margin, people are looking at their portfolio constructions and saying, given the uncertainty that's been raised in the US, do we want to rebalance that a little bit? And I'd say the rebalancing so far has been at the margin. Investors can
rebalance their portfolio in two different ways. If you're over here in Europe, and if European investor, they can sell US assets, but also if the relationship between the dollar and the euro changes, that rebalances their portfolio waiting too, and so we've seen that over the.
Course of the last few weeks.
So investors are asking a risk premium, a pretty hefty risk premium to own US assets at the moment, even if there's a reversal in terms of terrorists, does it come back to what it was like or is there a permanent change.
Well, I'm not sure that they're asking a pretty hefty risk premium. They're certainly asking a different premium than where we were three months ago.
But I think everything's got to be looked at, you know, in a broader perspective.
You know, the moves have been real in terms of the repricing of equities, particularly some of the growth stuff, the Magnificent seven, some of these stocks, you know that really led the last rally. But i'd also you know, step back and just say, you know, when you look at where stocks were a year ago, when you look at where stocks were six months ago, you know, we had a big move up in the early part of the year, and we've.
Kind of reset to kind of where we were, you know, six and twelve months ago.
What's really important is people need to understand the policy set going forward and the prospects.
For growth going forward.
And at the moment, as I said to you a few minutes ago, the level of uncertainty is just too high. And so until we have more certainty about the policy directive. It's hard for you to see more capital allocation, more investment.
Does the dollar remain a reserve currency?
Absolutely in ten years, twenty years.
I absolutely think the dollar is going to be the reserve currency. But the value of the dollar relative to other alternatives can shift. And I do think over time the US needs to be very focused on our levels of debt, are deficit spending, etc. And I think to the degree that we don't handle that appropriately, it can put more pressure on the dollar. But I don't see a scenario in the near term where I think it's likely that the dollar is not the reserve currency.
For the world.
So I know you're basically saying, look, keep a cool head until we have a better understanding, right, some of the policies put in place, But what does it do to the US economy going forward? Does it mean, you know, does a FED need to cut rights?
Because if I'm certain growth, well, I think it depends.
You know, Golden Sacks has lowered its growth forecast from two percent two point five percent. You know, I'm not It's not clear how this will all play out in the coming months. No one really knows. But to the degree that the economy slows, you know, ultimately, the.
FED will try to act to buffet, you know, some of that slow down in the economy.
To the degree that we go into recession, you know, that will lead to a different reaction. So again, the FED will look at the data. We'll look at the information, they'll look at labor, the look at growth.
And they'll make decisions based on that.
Everyone wants to project forward and know the answer for a moment in time where it's more uncertain than makes everybody comfortable, and I just you know, I just.
Say, it's a moment in time.
Let's you know, step back, Let's see how some of these trade deals are cut. Let's see what policy actually does go into place, and that will help us better understand the forward growth trajectory. But it's clearly been slowed by these actions. And I'm talking to CEOs, as I'm talking to our clients, they are holding back on investment
and they're certainly tightening their belt. You're going to see some companies laying off, you know, employees and running their businesses tighter because of this level of uncertainty.
We're you surprised, and are your client surprised that it's hit growth maybe more than inflation.
You know, I think you're gonna have pressures on both fronts. But again it depends. It's one thing to talk about reciprocal tariffs, but from an inflation every perspective, it actually depends on what tariffs go into place.
With respect to growth, There's no question.
The uncertainty slows down growth, and so everyone's growth forecasts have come down, by the way, not just in the US. This affects global growth everywhere, and so the forward trajectory of growth, given the current policy initiatives, has slowed. And now we're going to have to wait and see how this all moves forward to have a clearer sense of how much.
How long, et cetera. Where's China and all of this.
Well, China is a hugely important and trading partner, you know, to the West, to the US, to Europe.
At the moment, we're in the early stages of what I think.
Is an obvious negotiation between the US and China, and we need more clarity. But the current state of affairs is not sustainable, and so that's why I think there will be some change. We're starting to hear the administration, you know, talking about the fact that there needs to be changed and what's in place is not sustainable. But no one knows exactly how this will play out at the moment, and that's that's increasing the level of uncertainty.
Devid when you look at you know, a lot of investors and I think also Goldman Sachs did quite a lot in the Middle East.
Is this one of your.
Main points of focus? And is that in case, you know, things dry up in the US or is it just business sense to go for the New East right now?
Well, the Middle East is a very very interesting business opportunity for firm like Goldman Sachs. They have enormous capital resources that they export around the world and they invest. We want a big asset in wealth management business and there are you know, many of these these Middle Eastern nations and their pensions and their funds are partners of ours and other asset management firms all over the world.
You know, I think that continues.
It's not a function of the US Ralliot.
The US is thirty five percent of consumption in the world. That's not changing.
Okay, that's not changing. The US is a very very attractive market. I think Middle Eastern investors appreciate that opportunity as they appreciate opportunities in Europe and other.
Parts of the world. I think one of the most interesting things about what's going on is.
It would be really good for global growth and good for the global economy if Europe can make more progress on capital markets reform, European champions really bringing together and harnessing the power of the European Union.
And one of the things I'm encouraged by as I'm over.
Here visiting in Europe right now is I definitely take away a sense of resolve, of excitement about actually moving forward breaking down some of the regulatory bars that have been inhibition to growth here, and I think that would be quite constructive and more stimulative. Fixedtal action here in Europe also would be quite constructive for growth. So you know, there gives and gets, but it would be really terrific to see some progress on the economic trajectory of Europe
holistically here. And I'm encouraged by some of the things I'm hearing from our clients over here.
Where do you see opportunities in Europe? And again, is there like a six month window where if Europe doesn't get it sacked together it's.
Just two lights.
No, I think you know, there's never just a six month window, okay here or in the US. You know, it's a great sound bite, but these are big, important economies.
I do think that European.
Growth has been hampered by a very complex regulatory environment, particularly in Brussels, and by a sense that many of the nations have acted, you know, more nationalistically than holistically. I think given what's going on with the US, there's really a push to break down some of that regulatory bureaucracy, to really think about how European champions can be bolstered and there can be more investment. And I think that's a big opportunity. There's more tech innovation going on here.
It doesn't quite match up or compared to what's going on in the US, but there's more opportunity here. And so, you know, I'm hopeful that this is a moment in time where we can see greater investment and a greater sense of the opportunity of europolistically, and that would be quite constructive.
For global growth if we could see some progress on that.
We're talking about regulation. What are you expecting regulations for banks to look like in the US? Just do rip up some of the regulators.
Well, I think we saw an enormous pendulum swing in the last four years toward a much tougher financial.
Regulatory environment in the US.
I don't think it was constructive, and I do think from a positive perspective, this administration would like to reset that. I'm hearing some very constructive things along three fronts. One obviously is the leverage ratio, which is very very important for the treasury market. Two is on the capital regime and c CAR and GCID and the construct of how bank capital is calculated. And third is just on the
supervisory process. Supervisory process should be focused on ensuring that we have a safe and sound banking system and it shouldn't get distracted into other areas. And so I'm encouraged
by what I hear out of Treasury. I'm encouraged by what I hear more bloodly, and so I do think there's an opportunity to take that pendulum which really was an inhibitor to growth, free up some capital, get that capital we cycled into the system, increase lending activity, and so I'm quite constructive that we're going to see some positive change on the front of financial regulation.
In the US.
How quickly did that come?
I think we'll see, we'll see the beginnings of that in the coming months. And you know, certainly, if you and I were sitting here a year from now, I would hope I could point to a handful of very specific things that have swung that pendulum back to a more constructive place.
Do you think Europe then follow suits and deregulating at the margins or otherwise it puts European banks.
In a very difficult position into well, I think one of the issues for Europe is that the banking system in Europe has not come along over the last fifteen years the same way as the US banking system.
As you know, when.
You look at Europe, whether you're looking at you know, BNP is probably the largest European bank, with probably a seventy seventy five billion dollar market cap. You know today UBS would be larger than that, but just over one hundred billion.
You know, there are obviously lots of institutions.
In the United States that are bigger, broader, much larger market caap banks, and so in the context of that consolidation and growth in Europe and a capital markets union in Europe would be a very constructive thing for the capital markets more broadly. But Europe's been slow to make progress in that. I'm hopeful that we'll see more progress in the coming twelve to twenty four months.
If there's a lot of talk about credits and of course private equity and some of the old turn for investments, and also Goldman's trying to take advantage of how much does that grow in these uncertain times.
Well, when there's a higher level of uncertainty, the growth of private capital slows, just like the growth of you know, asset management business and public capital slows too when there's uncertainty.
But I think the long term secular.
Growth trends around private capital formation are solidly intact. And if you step back and you step out of this moment in time, you know, I think with a five or ten year view, we still have very good secular growth in private capital formation. You know, with respect to private credit, we haven't had a credit cycle in quite some time. If we have a real economic slow down or ultimately a recession, you will have a credit cycle.
We have to manage through that.
But with a five to ten year view, I still think growth in private capital formation is a long term trend that's firmly in place, and a firm like Goldman SAD and what we do in our asset wealth management business is very well positioned to benefit for that.
We often talk about a canary in the coal mine, or is there anything in either prior credit or anything that you were watching out for an indication of a significant souring. I guess of the economy or what.
Has happened that we're all watching is the level of uncertainty has changed the prospects for growth in the short term, and as a result of that, companies slow down capital plans, people because they have less confidence spend less.
You know, I think there was evidence.
In late January early February that when you looked at certain consumer discretionary businesses, we were starting to see a little bit of slow down. Obviously with the level of uncertainty we have. Now that's been accelerated, and so you know, there's no canary in the coal mine. The prospects for growth are slower and as a result of that, investment will be slower.
And until there's.
More confidence in the policy p forward, we're going to have to manage through a slower growth environment.
And so M and A and IPOs we'll take a backseat.
Too strong a statement again, Are you.
Telling me I'm too punchy as a.
Journalist, Well, I mean it's your job to be punchy.
It's my job to try to listen and try to, you know, try to find some balance. Capital markets activity was up year over year in the first quarter. M and A activity for deals above five hundred million.
So the kind of m and AU and I.
Talk about was up in the first quarter year over year. Sponsor m and A was up in the first quarter year over year. I think it depends on where we go from here. You know, if you look at the month of April, there's still been a reasonable amount of MNA activity. IPO activity is slower given the level of uncertainty. If the level of it certainly grows from here, yes, you won't see the same amount of capital markets activity.
But my own belief is things will settle down. We'll have a clearer policy perspective and some normalization of capital markets as we shift into twenty five and twenty six. Even if we have a slower economy or even far worse we have a recession, Ultimately, when the market adjusts to that and resets.
People need to.
Transact, they need to raise capital, they need liquidity for their investments, and so part of this is just a reset of expectations, and we're in the process.
Of that happening.
I mean, given all of this, where do you see hiring and firing and what divisions and where geographically.
At Golden's Well, I think this firm always manages its headcount with a long term perspective, and we will continue to do that. I think that in an environment like this, where there's more uncertainty, we probably control our headcount by doing less hiring, not by at the moment based on what I see doing more firing. But I do think one of the things that the labor force broadly will have to deal with when there's uncertainty with companies.
And I'm hearing this from CEOs more.
Broadly, CEOs titaner belts, and when CEO's titaner belts, they get focused on expenses. And so I think we're going to go through a period here in twenty twenty five where expense management is going to be more on focus for CEOs running big businesses than capital investment. And if we get more certainty as companies head into their planning processes. In the summer that might change, But if we have the level of uncertainty we have now, that probably won't change.
In twenty twenty five.
David, thanks so much for joining us. That was David Solomon's executive officer there of Golden Sachs