Are we headed for a recession? Goldman Sachs CEO answers

on May 18, 2022
  • David Solomon says the ongoing risk-off in U.S. stocks isn't very surprising.
  • He sees about a 30% chance of recession over the next 12 to 24 months.
  • The S&P 500 index is down nearly 20% versus the start of the year 2022.

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The S&P 500 index is down big this year; now about 20% below where it was at the start of the year. Still, Goldman Sachs CEO doesn’t find the ongoing risk-off very “surprising”.  

The ongoing sell-off in U.S. stocks isn’t surprising

According to David Solomon, it makes sense that U.S. equities are taking a hit as the central bank continues to tighten monetary conditions. In an interview with CNBC’s Andrew Ross Sorkin, he said:

Monetary conditions are tightening, fiscal conditions are tightening, and that’s having an impact on stock prices. I’d say there’s nothing that surprising about what’s happened so far. It’s been relatively predictable and not that volatile.

A day earlier, Fed Chair Jay Powell said the central bank will continue to tighten until inflation has been tamed. The U.S. CPI stood at 8.30% in April.

David Solomon sees a 30% chance of recession

The Goldman Sachs CEO sees a 30% probability that the economy is headed for a recession. The U.S. GDP unexpectedly contracted at an annualised pace of 1.40% in the first quarter of 2022.

The house view is slowing economic activity, higher rates, and a 30% chance of recession over the next 12 to 24 months. So, there’s a reasonable chance, at some point, we’ll have a recession or very sluggish growth, but it doesn’t mean that’s definitely going to happen.

A day earlier, famed economist Mohamed El-Erian also said the U.S. economy was unlikely to go into a recession unless the Federal Reserve makes “another policy mistake”.