Let's turn now to one of our top interviews this morning from Saudi Arabia's Future Investment Initiative Summit. Bloomberg has been speaking to CEO of Goldman Sachs David Solomon. Our Horizons Middle Eastern Africa anchor, Jama Brti, has been speaking to him. Here is the exclusive interview in full, starting with David Solomon's thoughts on Saudi Arabia as an investment destination.
We are excited to be opening up a new office in the financial district. And I would say we are committed to our presence here in Saudi Arabia. I was reflecting last night around the past eight years, seven or eight years that I've been coming to this event, and just watching the progress here. The progress has been meaningful, and we've participated in that progress. It's interesting to watch our clients here on the ground participate in that progress and be in a position to try to help them. But also, as you look at the international community, the international community is more interested in what's going on from an economic development perspective here, and we're delighted to be positioned to help our clients in this region.
Yeah, and it feels like there is so much deal making, even IPOs last year. It was a great year in terms of activity across all these exchanges, which means also more and more banks are looking to get involved in the action. Are you finding it difficult to retain and attract talent given the increasing amount of competition?
We have a very, very deep bench of bankers around the globe, including here in the region. We have a number of bankers from the region that base out of London and sometimes move back to this region. We've been able to attract talent. We're Goldman Sachs. We've been able to attract talent here in this region and other places in the world. I do agree there's more competition here, but that's positive actually, the levels of activity you're picking up. And I feel very, very confident in our ability to have really extraordinary people on the ground here to serve our clients very well.
One of the stories that our Bloomberg News team have been reporting on is the fact that the PIF have been refocusing some of their investment efforts domestically, which means that in terms of the relationship with asset managers in the region, there's been a lot more focus on or questions asked about what some of these asset managers are delivering on the ground within Saudi Arabia. How do you think that is going to shape up the asset management ambitions within the region?
It's a very, very natural progress. And we've been talking about what's going on here in the Kingdom, but the level of investment in diversifying the economy here in the Kingdom is significant. And of course, that's a significant focus of the PIF. For a firm like Goldman Sachs, where we're well positioned to serve as an investment banker, to serve as a trader, to serve as an asset and wealth manager, I think the firm is incredibly well positioned to help in this part of the world regardless of the trajectory. So we're excited about what's going on here and excited about the opportunities we'll have to help serve our clients here.
Can I ask you what your level of concern is vis-a-vis the geopolitical situation in the region right now?
I'm concerned about the geopolitical situation in the region. It's not good for security, it's not good for safety, it's not good for economic growth. And I'm hopeful that leaders both in the region and around the world and important governments around the world will be able to find a path to settle it down as we move forward. But of course, anytime you have geopolitical uncertainty, that's not good for economic growth and prosperity. And one of the things I just, as I spend time with people here on the ground, people want to find a path to a secure, prosperous, economically vibrant Middle East.
Has it impacted business trading in the region?
You know, it's interesting. People are obviously concerned and very, very focused, but it's not had a significant impact on activity up to this point on activity in this part of the region.
Yeah. Well, let's just talk more broadly. Your earnings came out very strong, surpassing expectations. Obviously the stock has had a good run this year. You must be feeling good, but let me just ask you how you're feeling about the outlook in general.
I feel good about the outlook. I think if you took a tour around the world, the US economy is actually doing quite well. It's been very, very resilient. I'm a little bit more concerned about European growth and also the economic situation in China. But overall, the engine of the US has been quite powerful, and our business, while global, is quite correlated to US growth. I can give you a list of things to worry about, but generally I can tell you also a list of things that I'm quite optimistic about. The progress around technology and AI and the opportunities to increase productivity are real. Progress that we're seeing around healthcare and medical technology are extraordinary in the impact that they'll have. So there are a lot of reasons to be optimistic about the growth and trajectory of economies around the world.
Yeah, but there's also fragility and things can go wrong. Well, I was going to pick up on that because it's been really difficult to sort of track the narrative around the US economy the last few months, because we've gone from hard landing to soft landing, now people are talking about no landing. I'm not going to ask you for a descriptor of the US economy, but what I will ask you is where are some areas of concern that you're seeing right now?
Well, the base case in the US is certainly at this point for a soft landing. That doesn't mean that at some point there can't be some sort of a slowdown in economic growth. But what I would say is the US economy is proving to be incredibly resilient. We do have an election in the US, and there'll be policy decisions that come out of that election. And so certainly those will have an impact on the trajectory in 2025 and 2026. With respect to European growth, European growth is more sluggish at the moment, and I'm concerned about the same thing that many people I know are talking to you about at this event: geopolitics, US-China relationship, the situation in Ukraine, the situation we just touched on in the Middle East. Also concerned broadly about inflation in the world, concerned about energy policy, which is obviously a significant issue. I'm concerned about immigration and migration, which is an issue in different parts of the world. So these are all issues that require leadership and policy direction, and I'm hopeful as we get past the election in the US and we continue to move forward, we'll see a clear direction of travel on some of these significant policy issues.
Well, I mean, the other big development is obviously the Fed have started cutting interest rates. And I think you were asked about what your expectations were for the Fed the last time. You said a 30% chance of a 50 basis point cut. So we'll give you that they went for the 50. But what matters more, do you think, for financial markets: how quickly they go or where they end up eventually?
I think there's an awful lot of attention on short-term rates. I'd actually be focused over time on longer-term rates. And I continue to be concerned about the level of spending and deficits in the United States. I don't think that's a short-term crisis factor, but unless we have policy change and get our spending and our debt under control, ultimately that's going to have a bigger impact on long-term rates than I think people are anticipating today. With respect to the short end of the curve, I think it's going to be very data dependent, and that data will be driven in part by what kind of policy we see coming out of the election. And so I think it's important to watch carefully. It seems like the Fed has been relatively transparent that we'll get another interest rate cut before the end of the year, but after that I think it will be very data dependent on what kind of policy implementation, what happens to growth, are the inflation numbers actually improving further. Those are all things I think the Fed will be watching carefully.
Can I just circle back to your first point on spending though? The 10-year Treasury is trading around 4.3%. Do you think that is adequately pricing in the fiscal premium in the years to come in the US?
