Goldman Sachs CEO David Solomon weighs in on small businesses, markets in the US and more

IThat’s less than a day after Goldman Sachs’ second-quarter earnings as the company beat Wall Street expectations of strong bond-trading returns — but CEO David Solomon has already shifted elsewhere.

The global banking giant has taken its more than decade-old mission to support small American businesses with its 10,000 Small Business Program to Washington, D.C., holding the largest gathering of business leaders in U.S. history and lobbying Congress for greater support for the sector, including a comprehensive management reform. American Small Business (SBA).

Small businesses faced a really tough challenge during the pandemic and now, with their exit [it]They deal with inflation in the economy,” Solomon says.

Through this initiative, which includes Warren Buffett, Michael Bloomberg and Mary Barra among its advisors, 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 since the program began in 2008.

Now, after going through unprecedented economic challenges over the past two and a half years due to the COVID-19 pandemic, 93% of companies recently surveyed by Goldman believe we are heading toward a US recession and 89% report broader economic trends, including Inflation, supply chain and workforce challenges continue to take a toll. With small employers accounting for 64% of new jobs created in the United States, according to the SBA, this is especially concerning.

“It is not surprising that such a high percentage of business owners are concerned about a recession,” Solomon says, noting that historically tightening cycles with inflation have usually been followed by stagnation.

But while Solomon does not yet believe that such a fate is “baked in the cake,” citing forecasts by US bank chief economist Jan Hatzius that pegged the odds at about 30% over the next 12 months – he realizes in his talk to business leaders managing institutions Big companies say the feeling is “a little bit higher” from the company’s point of view.

The rapidly changing economic environment coupled with the war in Ukraine and divestment of asset risk has taken its toll on business activity, Solomon says, with capital markets activity “weak” during the first half of the year. “Last year was anomalous – we said it when it was happening,” Solomon says. “but this [year] It’s an anomaly too… On the other end of the spectrum, history tells me there have been very few periods when capital markets activity has been weak for years, right? Because companies have to move forward.” Solomon estimates that capital markets activity may rebound later in the second half of this year or next.

While fears of a near-term economic crisis loom, 61% of business owners surveyed remain optimistic about their business and ability to grow their business forward. “The American economy is quite resilient,” Solomon says. “I can’t predict whether or not a recession will happen, but I know we will get through this recession.”

The American economy is very resilient. I can’t predict whether or not a recession will happen, but I know we will get through this recession.”

David Solomon, Chairman and CEO, Goldman Sachs

In terms of how the bank will advise clients and business owners in the near term, Solomon believes discipline is key. “The important thing is to stay focused on what you can control…and make sure you allocate your resources where they are really productive,” he says. “It’s time for a little more caution as we see if we can navigate this with a softer landing or not.”

For Goldman herself, that will mean increasing his risk profile and reducing the pace of hiring in the near term, something the company announced on its second-quarter earnings call — even as it braces for a hopeful recovery ahead.

“We’ve grown the company very significantly over the past few years and we still have plans for big hiring in the back half of this year,” Solomon explains. “Next year we will slow down the pace of recruitment significantly, but we are doing it no Hiring freeze. We are still going to plant [overall] The number of employees is very useful this year and I think it will grow again next year – but [just] at a slower pace. “

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

“You have to be a little bit careful until we have more certainty about the course of the economic environment,” Solomon says. “So a little caution, I think, can go a long way.”