Goldman Sachs Chairman and CEO David Solomon on the global business environment, AI, and the rise of private credit

Episode Summary

Executive Summary: David Solomon says the 2025 backdrop is more constructive for business and capital markets, but policy change, inflation risk, and geopolitics create real uncertainty. He expects a friendlier regulatory climate, modest rates outlook, stronger M&A and financing activity, continued private credit growth, and rapid AI-driven productivity gains, while urging focus on downside risks.

Main Topics: U.S. policy shift and business optimism (Priority: 5/5): Solomon argues the new administration should be more constructive for growth and regulation, but near-term uncertainty remains because key policies on immigration, trade, tax, and energy are still being implemented. Inflation, rates, and Fed outlook (Priority: 5/5): He says inflation pressures from services, food, tariffs, or immigration could alter the policy path, but his base case is a narrow range of rate outcomes in 2025 with possible cuts but no clear need for drastic moves. Capital markets and M&A rebound (Priority: 5/5): He sees capital markets activity improving meaningfully in 2025 as confidence rises, private equity returns to the sidelines, and M&A picks up from below-trend levels. Geopolitical risk and market volatility (Priority: 4/5): He identifies U.S.-China, Ukraine, and the Middle East as the three main geopolitical flashpoints, each capable of driving volatility, though he is relatively hopeful about progress on China and the Middle East. Global growth divergence, especially Europe (Priority: 4/5): He says U.S. growth remains stronger than Europe and China, and warns Europe must pursue more aggressive pro-growth policies and stronger integration to improve competitiveness. Financial regulation and capital reform (Priority: 4/5): Solomon wants faster appointments to key regulatory posts and more clarity on CCAR, Basel III, and GSIB rules so banks can deploy excess capital into lending and investment. Private credit and AI as strategic growth engines (Priority: 5/5): He highlights Goldman’s long-standing private credit platform and its positioning between public and private markets, while describing AI as an early but powerful productivity technology with major enterprise use cases.

Key Arguments: Policy change creates uncertainty even when the direction of travel appears more pro-business. Immigration, trade, tax, and energy policy could affect labor supply, inflation, and growth. The Fed likely stays in a narrow policy band in 2025 unless inflation unexpectedly accelerates. Capital markets and M&A should improve as confidence returns and sponsors re-engage. Geopolitical progress, especially with China and the Middle East, could be market-positive, while Ukraine remains difficult. Europe needs structural reforms and stronger cross-border cooperation to improve relative growth. Banks are holding excess capital because of regulatory uncertainty; clearer rules could release capital into the system. Goldman is well positioned in private credit because origination matters as much as capital. AI will likely raise productivity quickly, but adoption should be prudent and governed. Goldman’s strategic plan remains focused on growth, asset and wealth management, and efficiency.

Data Points: Private credit managed by Goldman Sachs: $140 billion - Solomon said Goldman has managed private credit for clients for decades and now oversees this amount. Goldman Sachs headcount: 46,000-47,000 people - He used this range when describing the firm’s scale and AI-related productivity opportunities. Goldman Sachs engineers: 12,000 engineers - He cited this workforce as a major lever for AI-driven productivity gains. Capital markets activity vs. trend: Below 10-year averages - He said activity has remained below historical norms after 2020-2021 and the 2022 reset. M&A and capital markets outlook: Back to 10-year averages or better in 2025 - He expects a meaningful improvement next year as confidence and sponsor activity rise. Asset and wealth management growth target: High single digits - He said this business can grow at this pace while improving margins and returns. Recorded date: Monday, January 27th, 2025 - The episode was recorded on this date.

Pivotal Quotes: "There are a range of significant policy areas where this administration is ushering in change. And whenever you have change, that creates uncertainty." — David Solomon: On the current business environment and why investors should remain cautious despite optimism. "I think we'll be in a narrow band with the policy rate." — David Solomon: On his base-case view for interest rates and Federal Reserve policy in 2025. "This is another example of technology continuing to drive growth and productivity. And also, interestingly, we sit in the middle of a lot of this here in the United States." — David Solomon: On AI’s long-term economic impact and U.S. leadership in the space.

Implications: Listeners should expect a more pro-growth but less predictable 2025: better capital markets, stronger AI and private credit momentum, and possible regulatory relief, offset by inflation, geopolitics, and policy uncertainty.