Goldman CEO Becomes Latest Bank Head With Gloomy Recession Prediction

Topline

Goldman Sachs CEO David Solomon became the latest investment bank bigwig to offer a gloomy economic forecast Tuesday, as most concur the Federal Reserve’s fight to tackle inflation, elevated prices due to geopolitical conditions like the war in Ukraine and other headwinds will likely cause the U.S. to enter a recession.

Key Facts

Solomon told CNBC Tuesday there’s a “good chance that we have a recession in the United States,” though he said it’s not certain it will be a “really difficult economic scenario.”

JPMorgan Chase CEO Jamie Dimon made waves last Monday when he told CNBC it’s “likely” the U.S. enters a recession in the next six to nine months, doubling down on his pessimistic outlook in his company’s earnings call Friday, saying “something worse” than a mild recession may be on the horizon and the checking accounts of Americans “will deplete probably by sometime mid year next year.”

Morgan Stanley CEO James Gorman said in June he sees a 50% chance of recession, and ominously warned there will be “consequences” and “disruption” from the Fed’s rate hikes during his bank’s earnings call Friday.

Citigroup CEO Jane Fraser bluntly forecasted the world will “experience rolling country-level recession starting this quarter” during her company’s earnings call Friday, predicting a “mild recession in the second half of ’23” in the U.S.”

Bank of America CEO Brian Moynihan was the most bullish among bank head honchos, saying during the bank’s earnings call Monday the market is already effectively “baking in” a recession and arguing U.S. consumers will remain “resilient” as spending data remains strong despite record inflation.

Key Background

Inflation is hovering around 8%, its highest level in more than 40 years, causing the Fed to pursue its most aggressive rate hikes since that as it fights to bring inflation down to its 2% target. One key metric showed the U.S. economy technically entered earlier this year after it had two straight quarters of negative gross domestic product growth, though most agree there isn’t actually a recession yet given unemployment remains low. The stock market has tanked as rates rose, with the S&P 500 down 23% year-to-date, on pace for its worst year since 2008.

Crucial Quote

“We would have pretty damn good returns in a recession,” Dimon said in JPMorgan Chase’s earning call Friday.

Surprising Fact

Investors concur with Dimon, as his company’s stock has soared 16% over the last week, while shares of Goldman, Citigroup, Bank of America and Wells Fargo are up 8% or more in the period, all outpacing the market.

Further Reading

‘Real Danger’ Of Global Recession Intensifies As Rate Hikes Threaten $4 Trillion In Economic Losses, World Bank Warns (Forbes)

‘Worst Is Yet To Come’: IMF Cuts Economic Outlook And Warns Global Inflation Still Hasn’t Peaked (Forbes)