Goldman’s Solomon Says Market Greed Is Now Outpacing Fear

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Goldman Sachs Group Inc. Chief Executive Officer David Solomon said that markets could face a rocky time ahead as the global economy seeks to emerge from the abrupt impact of the pandemic. 

“When I step back and think about my 40-year career, there have been periods of time when greed has far outpaced fear -- we are in one of those periods,” Solomon said in an interview at the Bloomberg New Economy Forum in Singapore. “My experience says those periods aren’t long lived. Something will rebalance it and bring a little bit more perspective.”

Global markets have surged during the pandemic, fueled by massive stimulus that has also stoked profits at banks such as Goldman. Concern is now rising that accelerating inflation will pose a challenge to a sustained recovery as central banks may be forced to raise interest rates in response. 

“Chances are interest rates will move up, and if interest rates move up that in of itself will take some of the exuberance out of certain markets,” Solomon said. 

Solomon also discussed the challenge of climate change, saying the transitioning to a green economy was “hugely important.”

Goldman was among banks, investors and insurers that earlier this month committed to decarbonizing by mid-century as signatories of the Glasgow Financial Alliance for Net Zero. Still, the initiative was met with skepticism as climate activists and nonprofits questioned whether big finance is capable of rapidly weaning itself off fossil fuels. Goldman, along with others, have previously made it clear it’s not feasible to stop working with the industry.

“We have to recognize we are trying to drive very dramatic change,” Solomon said, emphasizing that the transition will take time.

China

Goldman is at the forefront of a push by global banks to gain a bigger foothold as China’s market opens, jostling to capture billions of dollars in potential profits. The firm last month gained approval to take full ownership of a securities venture, ending a 17-year joint venture. The firm has plans to double its workforce in China to 600 and ramp up in asset and wealth management. As of last month, it had added 116 staff onshore this year, boosting the total to more than 400.

But Wall Street banks are also dealing with a number of flash points between China and the U.S. Some U.S. lawmakers have questioned the push into China, which is counting on investments to help support its economy. Beijing has been cracking down on broad swathes of its private sector, roiling markets and prompting investors such as George Soros to warn against investing in the country.

According to Solomon, there’s no direct pressure in the U.S. to change the bank’s long term to plans in China, but said that from time to time, there may be pressure to do certain things differently. 

Also attending the forum, Chinese Vice President Wang Qishan said China and the world must work together to boost global economic growth, vowing that Beijing will continue opening up more to foreign investment at a time when more countries are raising barriers over national security concerns.

“I think China wants to grow its capital markets, they want more listing activity in Hong Kong and onshore,” Solomon said. The participation of global institutions “strengthens their capital markets and so my guess is they’ll continue to support that, but the world can change,” he said.

Hong Kong

Solomon said that this was his first visit to Asia since early 2020, but that he has no plans to visit China and Hong Kong. His counterpart at JPMorgan Chase & Co., Jamie Dimon, touched down in Hong Kong this week after receiving an exemption from the city’s stringent quarantine, where he highlighted that the restrictions were making it harder for the bank to retain talent.

Solomon said the strict approach to Covid in China and Hong Kong is a “certainly a headwind for global talent in that part of the world.”

The finance industry is ratcheting up pressure on Hong Kong to ease quarantine rules and abandon its zero-Covid policy. A survey found almost half of major international banks and asset managers are contemplating moving staff or functions out of the city.

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