IIt’s less than a day after Goldman Sachs posted second-quarter earnings, where the firm beat Wall Street’s expectations of strong bond trading revenue—but CEO David Solomon has already shifted his focus elsewhere.
The global banking giant has taken its decade-plus mission of supporting America’s small businesses through its 10,000 Small Business Program to Washington, D.C., hosting the largest gathering of business leaders in U.S. history. Has lobbied Congress for more significant support for the region, including an overhaul of the US Small Business Administration (SBA).
“Small businesses faced a really tough challenge during the pandemic and now, as they are coming out [it]dealing with inflation in the economy,” Solomon says.
Through the initiative, which counts Warren Buffett, Michael Bloomberg and Mary Barra among its advisors, Goldman Sachs has provided training and financing to more than 12,800 entrepreneurs who have collectively raised over $10,000 since the program’s inception in 2008. 17.3 billion in revenue and employs over 250,000 workers.
Now, after facing unprecedented economic challenges over the past two and a half years due to the COVID-19 pandemic, 93% of businesses recently surveyed by Goldman believe we are headed for a US recession and 89% report macroeconomic trends, including inflation. , supply chain and workforce challenges are still taking a toll. With smaller employers creating 64% of new jobs in the US, according to the SBA, this is particularly troubling.
“It is not surprising that such a high percentage of these business owners are concerned about recessions,” Solomon says, adding that historically speaking, tight cycles with inflation usually followed a recession.
But while Solomon doesn’t see such a fate as “baked in the cake” yet, pointing to the bank’s forecasts of U.S. chief economist Jan Hetzius puts the odds at around 30% over the next 12 months—that Recognizes in talking to business leaders running large corporate organizations that the sentiment is “little more” than the firm’s in-house approach.
With “anemic” capital market activity during the first half of the year, Solomon says, the rapidly changing economic climate in Ukraine coupled with war and asset risks has taken its toll on business activity. “Last year was an anomaly – we called it when it was happening,” Solomon says. “but this [year] There is also an anomaly… On the other end of the spectrum, history tells me that there have been very few times where capital market activity has remained anemic over the years, right? Because businesses have to move.” Solomon expects capital market activity to pick up in the second half of this year or the end of next year.
And amid strong fears of a near-term economic crisis, 61% of business owners surveyed still remain optimistic about their businesses and their abilities to grow their business. “The US economy is quite resilient,” Solomon says. “I can’t predict whether there will be a recession or not, but I know we will overcome it.”
“The US economy is quite resilient. I can’t predict whether there will be a recession, but I know we will recover from it.”
In terms of how the bank is advising customers and business owners in the near future, Solomon believes discipline is key. “The important thing is to focus on what you can control … and make sure you’re allocating your resources to the places where they’re actually being productive,” he says. “It’s time to be a little more careful while we see if we can navigate it with a soft landing.”
For Goldman, that would mean raising its risk profile and scaling back the hiring momentum in the immediate term, something the company announced on its second-quarter earnings call — even as it looks ahead to an expected one. Prepares accordingly for rebound.
“We have grown the firm significantly over the years and still have significant recruitment planned in the back half of this year,” explains Solomon. “Next year, we’re going to slow down significantly, but we Don’t Hiring Freeze. We’re still going to stop growing ourselves [overall] The workforce this year is very significant and, I anticipate, it will rise again next year—but [just] at a slow pace.”
Solomon’s North Star is focused on the long term for businesses navigating the current uncertainty. “The trick in this environment is that you always have to take the long view and invest in your business,” he says. It doesn’t hurt to wait for the dust to settle down a bit.
“Until we have more certainty about the trajectory of the economic environment, you have to be a little cautious,” says Solomon. “And so a little caution, I think, can go a long way.”