Goldman Sachs CEO worried about excessive market greed

“When I step back and think back to my 40-year career, there have been times when greed has far surpassed fear. We’re in one of those times,” Solomon said during a press conference. Bloomberg New Economy Forum interview in singapore wednesday

“Generally speaking, my experience says that these periods are not long lasting. Something will rebalance them and bring a little more perspective,” Solomon added.

The CEO of Goldman Sachs isn’t the only one worried about the excesses and scum in the market.

The CNN Corporate Fear and Greed Index, which measures seven indicators of investor sentiment, has shown signs of extreme greed for much of this month.

Solomon told Bloomberg he was concerned about how the “massive amount” of pandemic-fueled stimulus from central banks and governments around the world was pushing up inflation, as well as the prices of assets like actions.

This is why the US Federal Reserve is now seeking to withdraw some of its support during the crisis by starting to cut or reduce the amount of bond purchases that have helped keep long-term rates low.

Isn’t the market prepared for more volatility?

Solomon said it was not clear whether the market was prepared for how quickly the Fed plans to decline, let alone the possibility of interest rate hikes once the cut is over.

“There’s a chance that central banks could unwind this massive stimulus in a way that doesn’t create some sort of tantrum or some real shock to the markets, but there’s also a chance that they won’t. cannot be done that way, ”Solomon said.

He also told Bloomberg that if long-term interest rates continue to rise, “that in itself will remove some of the exuberance from some markets.”

Salomon warned that many investors don’t remember, or weren’t there yet, when inflation skyrocketed in the 1980s and the Fed was forced to hike rates drastically: “This It has been a long time since we have operated in an environment where the general trend on interest rates has been higher.

Moreover, with so many stocks and other performing assets, investors may delude themselves into thinking that it is easy to make money in the market, he added.

“Everyone is feeling pretty smart right now because most of the things you invest in are going up. It’s not the way it normally works,” he said. “My experience tells me that it is a moment in time that is not a lasting moment.”

Of course, Solomon’s Goldman Sachs benefited greatly from this environment. The bank’s stock is up nearly 50% this year, making it one of the top performers in the Dow.
Goldman Sachs said last month it made $ 5.4 billion in third-quarter profit, beating expectations. Revenue also exceeded expectations, rising 26% from a year ago to $ 13.6 billion.
As a result, bonuses are expected to rise sharply at Goldman Sachs and other major investment banks this year.


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