Goldman CEO Solomon Sees Very Small Chance of US Recession

David Solomon, CEO of Goldman Sachs, has expressed a cautious optimism regarding the U.S. economy's prospects in 2025, stating that the chance of a recession is small but not zero. This assessment contrasts with the more bullish outlook of Stephen Schwarzman, CEO of Blackstone, who predicted that the U.S. had no chance of experiencing a recession in 2025. Solomon's view is more in line with the consensus of Wall Street economists, who have been too pessimistic in their expectations for U.S. real GDP growth in recent years.

Solomon's cautious optimism can be attributed to several factors. First, he cited the exceptionally strong corporate and household balance sheet fundamentals, which have contributed to the U.S. economy's resilience. This suggests that businesses and consumers have the financial capacity to weather economic storms, which could help mitigate the impact of a potential recession. Second, Solomon noted that the 2020-22 inflation shock proved temporary, as supply expansion and productivity increases helped normalize inflation. This indicates that the economy can adapt to changing conditions, which could help avoid a recession. Lastly, Solomon pointed out that the U.S. economy was growing at a robust pace of 5% to 6% annually when the Federal Reserve began hiking interest rates in 2022. This momentum allowed the economy to withstand historically steep rate increases without entering a recession.

However, Solomon also acknowledged that the economic outlook remains uncertain, and several factors could change in the coming months. Inflation dynamics, geopolitical risks, fiscal policy, and monetary policy are all areas that could evolve and impact the likelihood of a recession. For instance, persistent or rising inflation could lead to more aggressive monetary policy actions, which could in turn increase the risk of a recession. Geopolitical events, such as the Russia-Ukraine conflict, can have spillover effects on the global economy, disrupting supply chains, increasing uncertainty, and negatively impacting economic growth.



In conclusion, Solomon's cautious optimism about the U.S. economy in 2025 is supported by strong fundamentals, temporary inflation, and economic momentum. However, the outlook remains uncertain, and several factors could change in the coming months, potentially impacting the risk of a recession. Investors should stay informed about these developments and adjust their portfolios accordingly.