Goldman Sachs CEO David Solomon evaluates the state of small businesses, markets and more in America

IIt’s less than a day after Goldman Sachs’ second quarter earnings where the company beat Wall Street expectations thanks to strong bond trading revenues, but CEO David Solomon has already shifted his focus elsewhere.

The global banking giant led its 10-year mission to support American small businesses through its 10,000 small business program in Washington, DC, by convening the largest gathering of business leaders in U.S. history and lobbying Congress for more support. significant for the industry, including a review by the US Small Business Administration (SBA).

“Small businesses faced a really tough challenge during the pandemic and now, as they are coming out of it [it]they are facing inflation in the economy, “Solomon says.

Through the initiative, which counts Warren Buffett, Michael Bloomberg and Mary Barra among its consultants, Goldman Sachs has provided training and funding to more than 12,800 entrepreneurs who have collectively generated $ 17.3 billion in revenue and employed more than 250,000 workers from the start of the program in 2008.

Now, after facing unprecedented economic challenges in the past two and a half years due to the Covid-19 pandemic, 93% of companies recently surveyed by Goldman believe we are heading towards a recession in the United States and 89% reports broader economic trends, including inflation, supply chain and workforce challenges continue to be felt. With small employers accounting for 64% of new jobs created in the United States, according to the SBA, this is of particular concern.

“It is not surprising that such a large percentage of these entrepreneurs are worried about a recession,” says Solomon, noting that cycles of tightening historically accompanied by inflation are generally followed by a recession.

But while Solomon still doesn’t believe such a fate is “baked in the pie,” pointing to US bank chief economist Jan Hatzius’s predictions that the odds are about 30% over the next 12 months, he acknowledges talking to business leaders by directing big business organizations that sentiment is “slightly higher” than the company’s internal opinion.

The rapidly changing economic environment, coupled with the war in Ukraine and business derisking, put a strain on commercial activity, says Solomon, with “anemic” activity on capital markets during the first half of the year. “Last year it was an anomaly, we said it when it was happening,” says Solomon. “But this [year] it’s also an anomaly … on the other end of the spectrum, history tells me there have been very few times when capital market activity has been anemic for years, right? Why businesses must go on ”. Solomon estimates that capital market activity could pick up later in the second half of this year or next year.

And while prevailing fears of a short-term economic crisis loom large, 61% of entrepreneurs surveyed still remain optimistic about their businesses and their ability to grow their business. “The US economy is quite resilient,” Solomon says. “I can’t predict whether or not there will be a recession, but I know we will.”

“The US economy is quite resilient. I can’t predict whether or not there will be a recession, but I know we will ”.

David Solomon, President and CEO of Goldman Sachs

As for how the bank advises clients and entrepreneurs in the short term, Solomon believes discipline is key. “The important thing is to stay focused on what you can control … and make sure you are allocating your resources to places where they are really productive,” he says. “It’s just time for a little more caution as we see if we can sail with a softer landing or not.”

For Goldman itself, this will mean raising its risk profile and scaling down the pace of hiring in the near future, something the company announced during its second quarter earnings forecast, even as it prepares for a promising rebound.

“We have grown the company very significantly in recent years and still have plans to take on major hires in the second half of this year,” explains Solomon. “Next year, we are slowing down the pace of hiring considerably, but we Not have a hiring block. We are still going to end up growing ours [overall] very significantly organic this year and I suppose it will grow again next year, but [just] at a slower pace ”.

Solomon’s North Star for companies navigating the current uncertainty remains focused on the long term. “The trick in this environment is that you always have to have a long-term vision and invest in your business,” she says. Waiting for the dust to settle a bit doesn’t hurt either.

“You have to be a little cautious until we are no longer certain about the trajectory of the economic environment,” says Solomon. “And so a little caution, I think, could go a long way.”


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