David Solomon says he's feeling pretty good about where stocks & the economy are going.
The Goldman Sachs CEO made four predictions when speaking at a tech conference in Italy this week.
A stock drawdown and a wave of losers from the AI trade are some things on his radar.
Goldman Sachs's top executive is feeling good about markets, with some important caveats.
David Solomon, the bank's CEO, struck an upbeat tone when speaking about stocks and the US economy at Italian Tech Week on Friday. Despite some risks on his radar, the CEO of the investment bank said he was generally unbothered about the state of markets, even as concerns swell about a potential stock market bubble and a slowing economy.
"I sleep very well and I'm not going to bed every night worried about what will happen next," Solomon said, speaking to Bloomberg at the conference.
Yet, while his long-term view is mostly optimistic, investors should be aware of some risks on the horizon.
Here are Solomon's four predictions about what comes next for markets and the economy.
The stock market could see a drawdown in the next few years
TIMOTHY A. CLARY/AFP via Getty Images
Historically, the stock market has "run ahead" of its potential when there's a new technology that generates a lot of interest and excitement, Solomon said. That appears to be the dynamic now, he said, commenting on the S&P 500's streak of records in the second half of this year.
The benchmark index has rallied back from its low in early April after tariffs were announced, and is up 15% year-to-date.
"You're going to see a similar phenomenon here. I wouldn't be surprised if in the next 12 to 24 months, we see a drawdown with respect to equity markets. But that shouldn't be surprising given the run we've had," Solomon said.
Solomon didn't have an exact prediction for how much or when the market could drop. A report from Goldman Sachs in August estimated that the S&P 500 had more than a 20% chance of seeing a drawdown within the next 12 months.
The bull market will create winners and losers
ANGELA WEISS/AFP via Getty Images
Solomon pointed to the internet boom of the 1990s and early 2000s, during which a handful of tech front-runners emerged. A few of those companies, like Amazon, have continued to prosper, while other companies that soared in the early days of the boom have slowly faded away.
"I guarantee you, at the end of the move, there'll be a bunch of winners and there'll be a bunch of losers. There'll be a bunch of capital that was deployed that ultimately delivered very attractive returns, and a lot of capital that was deployed that did not deliver returns," Solomon said, adding that this pattern was typical for any large investment cycle in markets.
[SRC] https://finance.yahoo.com/news/goldman-sachs-ceo-david-solomon-224115512.html
