Goldman Sachs CEO David Solomon: The macro setup for 2026 is quite good

David Solomon on the Macroeconomic Outlook & Goldman Sachs’ Position

Key Concepts:

• Fiscal Stimulus: Government spending and tax cuts designed to stimulate economic activity.
• Deregulation: Reduction of government regulations, intended to encourage investment and economic growth.
• Nominal Growth: Economic growth measured in current prices, without adjusting for inflation.
• Real Growth: Economic growth adjusted for inflation, reflecting the actual increase in purchasing power.
• SPACs (Special Purpose Acquisition Companies): Shell companies designed to raise capital through an IPO to acquire an existing business.
• Basis Points: A unit of measurement used in finance to describe the percentage change in an interest rate or yield (1 basis point = 0.01%).
• Capital Investment Surge: A significant increase in investment in capital goods, such as machinery, equipment, and technology.

I. Goldman Sachs’ Performance & Growth (Past 8 Years)

David Solomon, Chairman and CEO of Goldman Sachs, highlights the firm’s positive trajectory over the past eight years. He attributes this success to a dedicated team and a strategic focus on client service and growth. Specifically, he notes increases in:

• Market Capitalization: Driven by increased earnings.
• Client Franchise: Expansion of the firm’s client base.
• Market Share: Increased proportion of business captured within relevant markets.
• Firm Earnings: Overall profitability of Goldman Sachs.

Solomon acknowledges periods of challenge but emphasizes the firm’s adaptability and commitment to serving clients with increased financial resources. He states, “We’ve really worked hard as a team to grow the firm and… put more financial resources in front of our clients.”

II. Adapting to Technological Change & the Importance of Talent

Solomon addresses the impact of Artificial Intelligence (AI) and the need for Goldman Sachs to adapt. He emphasizes that organizations inherently resist change, but leadership’s role is to facilitate evolution. He states, “One of the responsibilities for leaders… is to figure out how to help organizations evolve and change.”

He recounts the firm’s historical adaptation to technological advancements, contrasting the early days with no computers, reliance on microfiche, and limited desktop access, to the present day. He illustrates this with anecdotes: needing to use payphones to return calls and receiving paged messages via analog systems. He stresses that while the way work is done will change, the core need for talented and motivated individuals focused on client service will remain constant. He anticipates a shift in the mix and number of employees, but not a departure from the fundamental need for human capital.

III. Macroeconomic Outlook for 2026 & Beyond

Solomon presents a positive macroeconomic outlook for 2026, citing several key factors:

• Strong Fiscal Stimulus: Continued government spending in the US and other developed economies.
• Capital Investment Surge in AI: Significant investment in AI and related technologies, driving economic activity.
• Deregulation: A shift towards reduced regulation in the US, freeing up resources for productive investment.
• Economic Growth Projections: Goldman Sachs’ economist, Yan Hatsius, forecasts 2.9% real GDP growth and 5% nominal GDP growth for the current year, aligning with the higher end of consensus estimates.

He believes these “tailwinds” will support strong economic growth and increased deal activity. He agrees with Jimmy’s assessment (presumably from earlier in the event) regarding the renewed willingness of companies to explore strategic opportunities.

IV. IPO Market Dynamics & Accessibility

Solomon discusses the current state of the IPO market, noting a resurgence compared to recent years. He anticipates potentially “very very large IPOs, unprecedented in size” this year. However, he acknowledges challenges for smaller IPOs:

• Discount Requirements: Smaller IPOs often require larger discounts to attract investors.
• Investor Patience: Investors demand more patience with smaller IPOs.
• Private Market Preference: Companies often prefer to sell privately for full value rather than undergo the incremental process of multiple IPO tranches.

He emphasizes the importance of broader participation in the IPO market, particularly for smaller investors, and notes that SEC Chair Gary Gensler is focused on addressing these issues. He states, “Our capital market system is the best in the world… because we have a risk culture here where people want to participate in this growth.”

V. US Debt & Deficit Concerns & Dollar Strength

Solomon expresses concern about the escalating US debt and deficit, stating, “I have real concern for the continued level of deficit spending and the growth of the deficit, the debt.” He believes sustained higher growth is crucial to mitigate these concerns.

He acknowledges the bond market’s relative calm despite the debt levels, attributing this to several factors:

• Interest Rate Cuts: A recent 100 basis point reduction in interest rates.
• Dollar Strength: The dollar’s position as the dominant global currency, offering limited alternatives for investors.
• US Economic Importance: The US’s central role in the global economic ecosystem.

However, he cautions that without addressing the deficit, “there will be a moment in time where we have… speed bumps or shocks or things that that force us to readjust our behavior.”

Notable Quote:

“One of the responsibilities for leaders… is to figure out how to help organizations evolve and change.” – David Solomon

Data & Statistics:

• Goldman Sachs’ Market Cap: Increased over the past eight years (specific figures not provided).
• Yan Hatsius’ Economic Forecast: 2.9% real GDP growth and 5% nominal GDP growth for the current year.
• Interest Rate Cuts: 100 basis points in the current cutting cycle.

Conclusion:

David Solomon presents a cautiously optimistic outlook for Goldman Sachs and the broader economy. He highlights the firm’s strong performance, its commitment to adapting to technological change, and the positive macroeconomic factors driving growth. While acknowledging concerns about the US debt and deficit, he believes that sustained higher growth can help mitigate these risks. His emphasis on client service, talent development, and navigating a complex global landscape underscores Goldman Sachs’ strategic priorities for the future.