Goldman CEO Solomon on Trump Tariffs, Market Volatility, Dollar

Summary

In this conversation, key insights are shared on the state of the U.S. economy under the Trump administration, focusing on trade policies, market volatility, and the uncertainty surrounding economic growth. The speaker discusses the impact of policy uncertainty on business investments and the stock market, highlighting concerns over tariffs and the weakening of the dollar. The importance of U.S. Treasuries as a safe haven is emphasized, alongside the long-term prospects for the dollar as a reserve currency. The conversation also touches on global growth, Europe's economic trajectory, and financial regulation in both the U.S. and Europe.

Takeaways

• 😀 100 days into Trump's presidency, there's significant volatility and uncertainty in the markets, particularly around trade policies.
• 😀 The level of uncertainty raised by the administration's trade actions has led to reduced investment and slower growth expectations.
• 😀 U.S. Treasuries remain a safe haven asset, but the risk premium for U.S. assets has increased due to uncertainty around policy.
• 😀 The dollar is likely to remain the global reserve currency in the long term, but its value relative to other currencies could fluctuate.
• 😀 Goldman Sachs has lowered its U.S. growth forecast for 2025, with the Federal Reserve likely to adjust policies depending on economic conditions.
• 😀 Current trade uncertainty is slowing down growth globally, not just in the U.S., with many companies holding back on investments.
• 😀 The trade negotiations with China are still in early stages, and the existing situation is unsustainable, leading to higher uncertainty.
• 😀 Europe has potential growth opportunities if it can make progress on capital markets reform and break down regulatory barriers.
• 😀 Financial regulation in the U.S. is expected to reset under the new administration, focusing on freeing up capital for growth and investment.
• 😀 In uncertain times, private capital growth slows, but long-term trends in private credit and capital formation remain positive.
• 😀 M&A activity has seen growth in 2025 despite market uncertainty, but IPO activity is slower, and further uncertainty could lead to a slowdown in capital markets activity.

Q & A

How would you describe the current moment in time, 100 days into the Trump administration?

The current moment is marked by significant uncertainty, especially in the context of trade policies. While some policy initiatives are intriguing for the market, the volatility and lack of clarity around trade actions have raised concerns. Another 100 days are needed to better understand the direction of these policies and their impact on the market.

How have the markets responded to the uncertainty introduced by the Trump administration’s policies?

The markets have experienced a dramatic sell-off, although there has been some recovery. The volatility is not just affecting markets but businesses and individuals, as the uncertainty has caused people to tighten their belts, invest and spend less, ultimately slowing down growth.

What is the impact of the uncertainty on the U.S. dollar and treasuries?

U.S. Treasuries remain a safe haven asset, but due to the shifting uncertainty, there's been a weakening of the dollar. Investors are rebalancing their portfolios, considering the risks associated with U.S. assets. While the dollar remains the world’s reserve currency, its value relative to other currencies can shift depending on global and domestic factors.

Do you think the U.S. dollar will continue to be the world’s reserve currency?

Yes, in the long-term, the U.S. dollar will remain the reserve currency. However, its value relative to other currencies may fluctuate. The U.S. must manage its debt and deficits carefully to avoid putting unnecessary pressure on the dollar.

What do you think the Federal Reserve will do if the U.S. economy slows down due to the uncertainty?

The Federal Reserve will closely monitor the economic data, such as labor trends and growth indicators, and will likely adjust its policies if necessary. If the economy enters a recession, the Fed may reduce interest rates to stimulate growth.

How has the uncertainty affected business investment and growth forecasts?

Uncertainty has led to lower growth forecasts and companies are holding back on investment. Many CEOs are tightening their belts, focusing on cost management rather than capital investment, which will slow down overall economic growth.

What role does China play in the current global economic uncertainty?

China is a major trading partner for the U.S. and Europe. The ongoing negotiation between the U.S. and China is a critical aspect of the uncertainty. The current trade relations are not sustainable, and changes are expected, although no one knows the exact outcome yet.

Is there a risk of a major economic slowdown due to the policies being implemented?

Yes, the uncertainty and the policies being put in place have slowed global growth. While no one can predict exactly how this will unfold, many forecasts, including Goldman Sachs’, have lowered their growth expectations.

What are the prospects for Europe in terms of economic growth and regulation?

Europe faces challenges in terms of complex regulatory environments and nationalistic tendencies that hinder growth. However, there is potential for improvement, especially with efforts to break down regulatory barriers and encourage more investment. If Europe progresses on these issues, it could have a positive impact on global growth.

What is the outlook for the private capital and credit markets during times of uncertainty?

During uncertain times, the growth of private capital and credit markets tends to slow, as companies become more cautious. However, the long-term growth trends for private capital remain strong. Despite current challenges, private equity and credit markets are expected to continue their growth over the next 5 to 10 years.