David Solomon Is Less Optimistic About The Economy

David Solomon, the chief executive of Goldman Sachs, said that the company would have to cut back on spending and hiring as it copes with a slowing economy. Speaking at The Wall Street Journal's CEO Council Summit, Solomon said the idea shouldn't be shocking given how tightly the company's expansion is connected to the state of the world economy.

  • Many corporate executives have cut back their expectations this year as a result of the stock market's collapse, the conflict in Ukraine, and the Federal Reserve's effort to combat inflation by raising interest rates
  • Overall bank profits, including those at Goldman, have decreased as a result of the deal-making slowdown in IPOs and M&As
  • The Wall Street behemoth planned a significant restructuring in October with the goal of reducing the company's reliance on the up-and-down industries of deal-making and trading

Jamie Dimon Is Also Pessimistic

Consumer spending is remaining stable thanks to the extraordinary government assistance during the pandemic, but inflation and rate increases are "eroding everything," the CEO claimed. The CEO predicted that the high levels of consumer spending seen in 2022 would not last for very long and emphasized the risk that rising interest rates pose as the Fed attempts to control inflation.

  • Among the "storm clouds" Dimon is keeping an eye on are the geopolitical turmoil of this year, particularly the conflict in Ukraine and strained trade relations with China
  • He pointed out that, as the dollar increases, international trade for commodities like oil will continue to cost more because weaker currencies are compelled to make up for the difference

GM's, Walmart's and Union Pacific's CEOs Are Also Prudent

The automaker GM is moving cautiously in order to be ready for a potential fall in demand, similar to what other industries have experienced. Mary Barra, GM's CEO, stated that GM is budget-wise planning for "a reasonably conservative 2023" but that she is still observing "pent-up demand" remaining from the pandemic.

  • While purchasing is still high at Walmart, Doug McMillon, Walmart's CEO, has noticed more cautious spending in some areas, such as toys and electronics
  • Although Walmart's staffing problems from the pandemic have started to improve as a result of salary increases, McMillon indicated that there is still a hiring crunch at the cashier level. He insured that Walmart would not implement staff reductions in the event of a severe recession

According to Union Pacific Railroads CEO Lance Fritz, shipping is slowing down, which suggests that consumer spending is declining and the financial system is becoming tighter.

“The Fed is trying to hit all of us in the line of fire with a slower economy and hurting demand. It’s not good,” Lance Fritz for CNBC

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Olga Subach on Unsplash.