April 30, 2025 • 17 mins
The uncertainty caused by Trump’s tariff policies has been spooking business leaders and roiling the markets. And according to Goldman Sachs CEO David Solomon, there could be more economic pain ahead — at least in the short term.
Today on the Big Take, Bloomberg editor-at-large Francine Lacqua sits down with Solomon at the Norwegian sovereign wealth fund’s annual investment conference in Oslo. He shares his thoughts on the fate of the US dollar as a reserve currency, opportunities for new investment in European markets and his predictions for global growth in the coming year.
Read more: Goldman’s Solomon Says Markets to ‘Settle Down’ After Chaos
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:11):
With its push to disrupt global trade, the Trump administration
has insisted its playing the long game. The president argues
that eventually tariffs on some of the US's largest trading
partners will usher in a new era for American manufacturing,
they'll raise money for proposed tax cuts, and they'll give
the entire US economy a boost. The juries still out
(00:34):
on that long term vision, but the short term impacts
are already starting to make themselves clear in whip sawing
markets and downgraded global growth forecasts. Government data published this
morning shows the US economy shrank zero point three percent
in the first quarter as companies rush to import goods
before tariffs took effect, and according to one of the
(00:56):
world's most influential banking executives, the uncertain caused by Trump's
tariff policies could mean more economic pain ahead.
Speaker 1 (01:05):
When there's a high level of uncertainty, people titanervelt, they
invest less, they spend less, and all those things slow
down growth.
Speaker 2 (01:15):
David Solomon is the CEO of Goldman Sachs, the behemoth
investment bank and financial services company that oversees three point
one trillion dollars in assets globally. Solomon sat down with
Bloomberg's editor at large, Francine Lacroix earlier this week in
Oslo during the Norwegian Sovereign Wealth Fund's annual investment Conference.
(01:36):
They talked about the fate of the US dollar as
a reserve currency, opportunities for new investment in European markets,
and what a slowdown could mean for IPOs and CEOs.
I'm Sarah Holder, and this is the big take from
Bloomberg News today. On the show how Goldman Sachs CEO
(01:59):
Dave at Solomon is assessing the economic impact of Donald
Trump's trade war.
Speaker 3 (02:08):
We have to start with Trump policies. It's been one
hundred days since the inauguration.
Speaker 4 (02:13):
Like where are we? We've seen a lot of volatility.
How would you describe this moment in time?
Speaker 1 (02:17):
Four one hundred days in And I would say there
are a handful of policy initiatives that are being put forward.
Some of them certainly are very very interesting and intreating
to the market. But what's been put forward on trade
so far has raised the level of uncertainty very significantly.
Speaker 5 (02:34):
And so I'd say, one hundred days in, we need.
Speaker 1 (02:36):
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
(02:57):
investment and growth, and I think it's going to be
important that we get more clarity on the direction of
travel from here.
Speaker 3 (03:02):
So if you look at markets, there's been a sum off,
a pretty dramatic sell off in the US assets.
Speaker 4 (03:07):
It's somewhat come back, but hasn't been too drastic.
Speaker 1 (03:10):
Well, it's not just for the markets, you know, first
and foremost, it's.
Speaker 5 (03:14):
For businesses, it's for individuals. You know.
Speaker 1 (03:16):
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.
Speaker 5 (03:25):
And so when you decrease.
Speaker 1 (03:27):
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 with 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
(03:48):
different rotation because of the.
Speaker 5 (03:49):
Nature of the policy.
Speaker 1 (03:50):
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.
Speaker 4 (03:55):
Our treasury is still safe haven.
Speaker 1 (03:57):
I think US treasuries absolutely are safe, but you can
reprice the safe of an 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.
Speaker 5 (04:15):
Margin, people are looking at their portfolio.
Speaker 1 (04:17):
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.
Speaker 3 (04:26):
Investors are asking a risk premium, 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.
Speaker 4 (04:36):
Is there a permanent change.
Speaker 1 (04:38):
Well, I'm not sure that they're asking a pretty hefty
risk premium. They're certainly asking a different premium than were
we were three months ago.
Speaker 5 (04:47):
But I think everything's.
Speaker 1 (04:47):
Got to be looked at, you know, in a broader perspective.
The moves have been real in terms of the reprice
of the equities, particularly some of the growth stuff, the
Magnificent Seven, some of these stocks, you know that really led.
Speaker 5 (04:58):
The last rally.
Speaker 1 (04:59):
But i'd all so step back and just say, 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.
(05:20):
And so until we have more certainty about the policy directive,
it's hard for you to see more capital allocation, more investment.
Speaker 4 (05:28):
Does the dollar remain a reserve currency? Absolutely, in ten years,
twenty years.
Speaker 1 (05:34):
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 or deficit spending, et cetera.
Speaker 5 (05:48):
And I think to the degree that we don't handle
that appropriately, it can put more pressure on the dollar.
Speaker 1 (05:53):
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.
Speaker 3 (06:00):
I know you're basically saying, look, keep a cool head
until we have a better understanding.
Speaker 4 (06:04):
Right, some of the policies could in.
Speaker 3 (06:05):
Place, But what does it do to the US economy
going forward?
Speaker 4 (06:09):
You know, does a FED need to cut rights? Because
if I'm.
Speaker 5 (06:11):
Certain general growth, I think it depends.
Speaker 1 (06:14):
You know, Goldman Sachs has lowered its growth forecast from
two percent too point five percent. 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,
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
(06:35):
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, they'll look at growth, and they'll make.
Speaker 5 (06:42):
Decisions based on that.
Speaker 1 (06:44):
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.
Speaker 5 (07:03):
But it's clearly been slowed by these actions.
Speaker 1 (07:07):
And as 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 employees and running their businesses tighter because of
this level of uncertainty.
Speaker 4 (07:21):
Well, where's China and all of this.
Speaker 1 (07:23):
Well, China is a hugely important trading partner to the West,
to the to Europe.
Speaker 5 (07:29):
At the moment, we're in.
Speaker 1 (07:30):
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.
You're starting to hear the administration 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
(07:50):
will play out at the moment, and that's that's increasing
the level of uncertainty.
Speaker 2 (07:57):
After the break, more from Francing the interview with Goldman
Sachs CEO David Solomon. They discussed the prospects of financial
deregulation on both sides of the Atlantic and what it
means that some companies are tightening their belts. Goldman Sachs
(08:20):
kicked off twenty twenty five with better than expected revenue.
In Q one of this year, Goldman stock traders rode
the market volatility to their highest revenues on record, but
CEO David Solomon says the company is entering a more
challenging operating environment as the trade war wages on, and
at the Norwegian Sovereign Wealth Fund's annual investment conference this week,
(08:42):
he told Bloomberg's editor at large, Francine Lacroix, that while
the US remains an attractive market for investors, he's also
eyeing Europe.
Speaker 1 (08:51):
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 you know,
champions really bringing together and harnessing the power of the
European Union.
Speaker 5 (09:10):
And one of the things.
Speaker 1 (09:11):
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 barriers that have been inhibition to growth here.
And I think that would be quite constructive and more stimulative.
Fixtal action here in Europe also would be quite constructive
(09:33):
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.
Speaker 4 (09:45):
Where do you see opportunities in Europe?
Speaker 3 (09:47):
And again, is there like a six month window where
if Europe doesn't get it backed together, it's.
Speaker 4 (09:50):
Just too light?
Speaker 1 (09:51):
No, I think you know, there's never just a six
month window here or in the US. You know, it's
a great sound bite, but these are the big important economies.
I do think that European growth has been hampered by
a very complex regulatory environment particularly in Brussels, and by
(10:11):
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
(10:33):
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
Europe holistically, and that would be quite constructive.
Speaker 5 (10:50):
For global growth if we could see some progress on that.
Speaker 4 (10:53):
I'm talking about regulation.
Speaker 3 (10:55):
What are you expecting regulation for banks to look like
in the US?
Speaker 4 (10:58):
Just do rip up some of the regular Well.
Speaker 1 (11:01):
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
(11:24):
is very very important for the treasury market. Two is
on the capital regime and the construct of how bank
capital is calculated.
Speaker 5 (11:32):
And third is just on the supervisory process.
Speaker 1 (11:36):
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
(11:57):
cycled into the system, increase line in 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.
Speaker 3 (12:07):
Do you think Europe then follow suits in deregulating at
the margins or otherwise it puts European banks.
Speaker 4 (12:13):
In a very difficult position.
Speaker 1 (12:14):
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.
Speaker 5 (12:22):
The same way as the US banking system.
Speaker 1 (12:24):
As you know, there are obviously lots of institutions in
the United States that are bigger, broader, much larger market
cap 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
(12:46):
the coming twelve to twenty four months.
Speaker 3 (12:48):
There's a lot of talk about credits and of course
private equity and some of the l turn for investments.
How much does that grow in these uncertain times.
Speaker 1 (12:56):
Well, when there's a higher level of uncertainty, the growth
of private capital slows, just like the growth of 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,
(13:17):
I think with a five or ten year view, we
still have very good secular growth.
Speaker 5 (13:20):
In private capital formation.
Speaker 1 (13:22):
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.
Speaker 5 (13:30):
A recession, you will have a credit cycle. We have
to manage through that.
Speaker 1 (13:33):
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 Golden
Sachs and what we do in our asset wealth management
business is very well positioned to benefit for that.
Speaker 3 (13:48):
We often talk about a canary in the coal mine,
or is there anything in either prior credit or anything
that you're watching out for an indication of a significant
souring I guess of the economy.
Speaker 1 (13:58):
Or well, what's 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.
Speaker 5 (14:20):
I think there was evidence in late.
Speaker 1 (14:21):
January early February that when you looked at certain consumer
discretionary businesses, we were starting to see a little bit
of slow down.
Speaker 5 (14:28):
Obviously, with the level of uncertainty we have now.
Speaker 1 (14:31):
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 path forward,
we're going to have to manage through a slower growth environment,
and so m.
Speaker 4 (14:47):
And A and IPOs will take a backseat.
Speaker 5 (14:51):
Too strong a statement.
Speaker 1 (14:52):
Again, capital markets activity was up year of year in
the first quarter, m and A activity for deals above
five hundre millions, So the kind of m ANDAU 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
(15:13):
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
(15:34):
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.
Speaker 3 (15:52):
And given all of this, where do you see hiring
and firing in what divisions and where geographically.
Speaker 1 (15:58):
At Goldman's, Well, I think this firm always manages its
headcount with a long term perspective, and we will continue
to do that in an environment like this, where there's
more uncertainty.
Speaker 5 (16:11):
We probably control.
Speaker 1 (16:12):
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.
Speaker 5 (16:25):
And I'm hearing this from CEOs.
Speaker 1 (16:27):
More broadly, CEOs tightener belts, and when CEO's titaner belts,
they get focused on expenses.
Speaker 5 (16:32):
And so I think we're going to go through a
period here in twenty.
Speaker 1 (16:34):
Twenty five where expense management is going to be more
in focus for CEOs running big businesses than capital investment.
And if we get more certainty as companies head into
their planning processes.
Speaker 5 (16:46):
In the summer, that might change.
Speaker 1 (16:48):
But if we have the level of uncertainty we have now,
that probably won't change in twenty twenty five.
Speaker 2 (16:57):
This is the Big Take from Bloomberg News. I'm Sarah Holder.
This episode was produced by Bloomberg TV. It was edited
by our Deputy Executive producer Julia Weaver, Patty Hirsch, and
Daniel Taube. It was fact checked by Rachel Lewis Kriskey
and Audriana Tapia, and mixed and sound designed by Alex Sugiura.
Our senior producer is Naomi Shaven. Our senior editor is
(17:18):
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make sure to subscribe and review The Big Take wherever
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Thanks so much for listening. We'll be back tomorrow.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:11):
With its push to disrupt global trade, the Trump administration
has insisted its playing the long game. The president argues
that eventually tariffs on some of the US's largest trading
partners will usher in a new era for American manufacturing,
they'll raise money for proposed tax cuts, and they'll give
the entire US economy a boost. The juries still out
(00:34):
on that long term vision, but the short term impacts
are already starting to make themselves clear in whip sawing
markets and downgraded global growth forecasts. Government data published this
morning shows the US economy shrank zero point three percent
in the first quarter as companies rush to import goods
before tariffs took effect, and according to one of the
(00:56):
world's most influential banking executives, the uncertain caused by Trump's
tariff policies could mean more economic pain ahead.
Speaker 1 (01:05):
When there's a high level of uncertainty, people titanervelt, they
invest less, they spend less, and all those things slow
down growth.
Speaker 2 (01:15):
David Solomon is the CEO of Goldman Sachs, the behemoth
investment bank and financial services company that oversees three point
one trillion dollars in assets globally. Solomon sat down with
Bloomberg's editor at large, Francine Lacroix earlier this week in
Oslo during the Norwegian Sovereign Wealth Fund's annual investment Conference.
(01:36):
They talked about the fate of the US dollar as
a reserve currency, opportunities for new investment in European markets,
and what a slowdown could mean for IPOs and CEOs.
I'm Sarah Holder, and this is the big take from
Bloomberg News today. On the show how Goldman Sachs CEO
(01:59):
Dave at Solomon is assessing the economic impact of Donald
Trump's trade war.
Speaker 3 (02:08):
We have to start with Trump policies. It's been one
hundred days since the inauguration.
Speaker 4 (02:13):
Like where are we? We've seen a lot of volatility.
How would you describe this moment in time?
Speaker 1 (02:17):
Four one hundred days in And I would say there
are a handful of policy initiatives that are being put forward.
Some of them certainly are very very interesting and intreating
to the market. But what's been put forward on trade
so far has raised the level of uncertainty very significantly.
Speaker 5 (02:34):
And so I'd say, one hundred days in, we need.
Speaker 1 (02:36):
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
(02:57):
investment and growth, and I think it's going to be
important that we get more clarity on the direction of
travel from here.
Speaker 3 (03:02):
So if you look at markets, there's been a sum off,
a pretty dramatic sell off in the US assets.
Speaker 4 (03:07):
It's somewhat come back, but hasn't been too drastic.
Speaker 1 (03:10):
Well, it's not just for the markets, you know, first
and foremost, it's.
Speaker 5 (03:14):
For businesses, it's for individuals. You know.
Speaker 1 (03:16):
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.
Speaker 5 (03:25):
And so when you decrease.
Speaker 1 (03:27):
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 with 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
(03:48):
different rotation because of the.
Speaker 5 (03:49):
Nature of the policy.
Speaker 1 (03:50):
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.
Speaker 4 (03:55):
Our treasury is still safe haven.
Speaker 1 (03:57):
I think US treasuries absolutely are safe, but you can
reprice the safe of an 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.
Speaker 5 (04:15):
Margin, people are looking at their portfolio.
Speaker 1 (04:17):
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.
Speaker 3 (04:26):
Investors are asking a risk premium, 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.
Speaker 4 (04:36):
Is there a permanent change.
Speaker 1 (04:38):
Well, I'm not sure that they're asking a pretty hefty
risk premium. They're certainly asking a different premium than were
we were three months ago.
Speaker 5 (04:47):
But I think everything's.
Speaker 1 (04:47):
Got to be looked at, you know, in a broader perspective.
The moves have been real in terms of the reprice
of the equities, particularly some of the growth stuff, the
Magnificent Seven, some of these stocks, you know that really led.
Speaker 5 (04:58):
The last rally.
Speaker 1 (04:59):
But i'd all so step back and just say, 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.
(05:20):
And so until we have more certainty about the policy directive,
it's hard for you to see more capital allocation, more investment.
Speaker 4 (05:28):
Does the dollar remain a reserve currency? Absolutely, in ten years,
twenty years.
Speaker 1 (05:34):
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 or deficit spending, et cetera.
Speaker 5 (05:48):
And I think to the degree that we don't handle
that appropriately, it can put more pressure on the dollar.
Speaker 1 (05:53):
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.
Speaker 3 (06:00):
I know you're basically saying, look, keep a cool head
until we have a better understanding.
Speaker 4 (06:04):
Right, some of the policies could in.
Speaker 3 (06:05):
Place, But what does it do to the US economy
going forward?
Speaker 4 (06:09):
You know, does a FED need to cut rights? Because
if I'm.
Speaker 5 (06:11):
Certain general growth, I think it depends.
Speaker 1 (06:14):
You know, Goldman Sachs has lowered its growth forecast from
two percent too point five percent. 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,
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
(06:35):
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, they'll look at growth, and they'll make.
Speaker 5 (06:42):
Decisions based on that.
Speaker 1 (06:44):
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.
Speaker 5 (07:03):
But it's clearly been slowed by these actions.
Speaker 1 (07:07):
And as 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 employees and running their businesses tighter because of
this level of uncertainty.
Speaker 4 (07:21):
Well, where's China and all of this.
Speaker 1 (07:23):
Well, China is a hugely important trading partner to the West,
to the to Europe.
Speaker 5 (07:29):
At the moment, we're in.
Speaker 1 (07:30):
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.
You're starting to hear the administration 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
(07:50):
will play out at the moment, and that's that's increasing
the level of uncertainty.
Speaker 2 (07:57):
After the break, more from Francing the interview with Goldman
Sachs CEO David Solomon. They discussed the prospects of financial
deregulation on both sides of the Atlantic and what it
means that some companies are tightening their belts. Goldman Sachs
(08:20):
kicked off twenty twenty five with better than expected revenue.
In Q one of this year, Goldman stock traders rode
the market volatility to their highest revenues on record, but
CEO David Solomon says the company is entering a more
challenging operating environment as the trade war wages on, and
at the Norwegian Sovereign Wealth Fund's annual investment conference this week,
(08:42):
he told Bloomberg's editor at large, Francine Lacroix, that while
the US remains an attractive market for investors, he's also
eyeing Europe.
Speaker 1 (08:51):
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 you know,
champions really bringing together and harnessing the power of the
European Union.
Speaker 5 (09:10):
And one of the things.
Speaker 1 (09:11):
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 barriers that have been inhibition to growth here.
And I think that would be quite constructive and more stimulative.
Fixtal action here in Europe also would be quite constructive
(09:33):
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.
Speaker 4 (09:45):
Where do you see opportunities in Europe?
Speaker 3 (09:47):
And again, is there like a six month window where
if Europe doesn't get it backed together, it's.
Speaker 4 (09:50):
Just too light?
Speaker 1 (09:51):
No, I think you know, there's never just a six
month window here or in the US. You know, it's
a great sound bite, but these are the big important economies.
I do think that European growth has been hampered by
a very complex regulatory environment particularly in Brussels, and by
(10:11):
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
(10:33):
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
Europe holistically, and that would be quite constructive.
Speaker 5 (10:50):
For global growth if we could see some progress on that.
Speaker 4 (10:53):
I'm talking about regulation.
Speaker 3 (10:55):
What are you expecting regulation for banks to look like
in the US?
Speaker 4 (10:58):
Just do rip up some of the regular Well.
Speaker 1 (11:01):
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
(11:24):
is very very important for the treasury market. Two is
on the capital regime and the construct of how bank
capital is calculated.
Speaker 5 (11:32):
And third is just on the supervisory process.
Speaker 1 (11:36):
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
(11:57):
cycled into the system, increase line in 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.
Speaker 3 (12:07):
Do you think Europe then follow suits in deregulating at
the margins or otherwise it puts European banks.
Speaker 4 (12:13):
In a very difficult position.
Speaker 1 (12:14):
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.
Speaker 5 (12:22):
The same way as the US banking system.
Speaker 1 (12:24):
As you know, there are obviously lots of institutions in
the United States that are bigger, broader, much larger market
cap 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
(12:46):
the coming twelve to twenty four months.
Speaker 3 (12:48):
There's a lot of talk about credits and of course
private equity and some of the l turn for investments.
How much does that grow in these uncertain times.
Speaker 1 (12:56):
Well, when there's a higher level of uncertainty, the growth
of private capital slows, just like the growth of 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,
(13:17):
I think with a five or ten year view, we
still have very good secular growth.
Speaker 5 (13:20):
In private capital formation.
Speaker 1 (13:22):
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.
Speaker 5 (13:30):
A recession, you will have a credit cycle. We have
to manage through that.
Speaker 1 (13:33):
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 Golden
Sachs and what we do in our asset wealth management
business is very well positioned to benefit for that.
Speaker 3 (13:48):
We often talk about a canary in the coal mine,
or is there anything in either prior credit or anything
that you're watching out for an indication of a significant
souring I guess of the economy.
Speaker 1 (13:58):
Or well, what's 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.
Speaker 5 (14:20):
I think there was evidence in late.
Speaker 1 (14:21):
January early February that when you looked at certain consumer
discretionary businesses, we were starting to see a little bit
of slow down.
Speaker 5 (14:28):
Obviously, with the level of uncertainty we have now.
Speaker 1 (14:31):
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 path forward,
we're going to have to manage through a slower growth environment,
and so m.
Speaker 4 (14:47):
And A and IPOs will take a backseat.
Speaker 5 (14:51):
Too strong a statement.
Speaker 1 (14:52):
Again, capital markets activity was up year of year in
the first quarter, m and A activity for deals above
five hundre millions, So the kind of m ANDAU 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
(15:13):
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
(15:34):
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.
Speaker 3 (15:52):
And given all of this, where do you see hiring
and firing in what divisions and where geographically.
Speaker 1 (15:58):
At Goldman's, Well, I think this firm always manages its
headcount with a long term perspective, and we will continue
to do that in an environment like this, where there's
more uncertainty.
Speaker 5 (16:11):
We probably control.
Speaker 1 (16:12):
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.
Speaker 5 (16:25):
And I'm hearing this from CEOs.
Speaker 1 (16:27):
More broadly, CEOs tightener belts, and when CEO's titaner belts,
they get focused on expenses.
Speaker 5 (16:32):
And so I think we're going to go through a
period here in twenty.
Speaker 1 (16:34):
Twenty five where expense management is going to be more
in focus for CEOs running big businesses than capital investment.
And if we get more certainty as companies head into
their planning processes.
Speaker 5 (16:46):
In the summer, that might change.
Speaker 1 (16:48):
But if we have the level of uncertainty we have now,
that probably won't change in twenty twenty five.
Speaker 2 (16:57):
This is the Big Take from Bloomberg News. I'm Sarah Holder.
This episode was produced by Bloomberg TV. It was edited
by our Deputy Executive producer Julia Weaver, Patty Hirsch, and
Daniel Taube. It was fact checked by Rachel Lewis Kriskey
and Audriana Tapia, and mixed and sound designed by Alex Sugiura.
Our senior producer is Naomi Shaven. Our senior editor is
(17:18):
Elizabeth Ponso. Our executive producer is Nicole beamsterbor Sage Bauman
is Bloomberg's head of Podcasts. If you liked this episode,
make sure to subscribe and review The Big Take wherever
you listen to podcasts. It helps people find the show.
Thanks so much for listening. We'll be back tomorrow.
Hosts And Creators
Sarah Holder
Saleha Mohsin
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