The chief executive of banking giant Goldman Sachs is warning that markets face multiple risks that could potentially worsen throughout the year.
In the bank’s latest Annual Report, David Solomon says that while he’s seeing “very powerful catalysts” that could benefit stock investors, he warns that the world is in the midst of a rapidly evolving environment where risks could become a lot more pronounced.
He specifically mentions the stress building in the $1.8 trillion private credit market, along with concerns about the $655 billion hyperscaler AI spend.
“In recent weeks, for example, concerns about private credit, including underwriting quality or exposure to software companies that may be adversely affected by AI, are a reminder that the credit cycle has not been repealed. Higher levels of market volatility across various risk assets, elevated geopolitical uncertainty, and greater capital deployment, especially into AI, require diligent risk management.”
Earlier this month, JPMorgan CEO Jamie Dimon warned that the US is now in the late stages of a credit cycle and that its impact could exceed expectations.
Solomon’s comments come as Goldman chief economist Jan Hatzius abruptly increases the odds of a US recession to 30% from his prior estimate of 25%. Hatzius also says oil price shocks due to tensions in the Middle East and the weakening impact of Trump’s major tax law passed last year could lift US unemployment from 4.4% to 4.6% by the end of 2026.
But Goldman Sachs maintains that there’s a 70% chance that the US avoids a recession this year, driven by expected Fed rate cuts in September and October.
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