How Goldman Sachs’ John Waldron is navigating “a more uncertain time”

Episode Summary

Executive Summary: John Waldron says the U.S. economy remains resilient despite policy turmoil, with recession still unlikely unless tariffs or higher long-end interest rates worsen materially. He describes a temporary corporate pause after Liberation Day, now easing into adjustment, while Goldman is moderating risk, watching capital markets thaw, and staying focused on client service, durable businesses, and scalable infrastructure.

Main Topics: U.S. economic resilience despite uncertainty (Priority: 5/5): Waldron argues the U.S. economy has held up better than expected after Liberation Day, with healthy consumers, strong employment, and ongoing fiscal support reducing recession odds. Tariffs and corporate decision-making (Priority: 5/5): He explains that tariff shocks caused companies to pause strategic planning, reevaluate supply chains, and delay major capital investments and M&A, though some are now adapting to a new tariff range. Interest rates and fiscal deficits as key risks (Priority: 5/5): Waldron says rising long-end yields and persistent large deficits are major concerns because they could constrain growth and appear unsustainable over time. Global asset allocation and U.S. exceptionalism (Priority: 4/5): He argues that some investors are reducing excess dollar exposure and hedging more, but the shift away from U.S. assets is still marginal rather than a wholesale rotation. Europe and Germany as relative beneficiaries (Priority: 3/5): He notes Europe is seeing increased interest as a beneficiary of hedging and U.S. reallocation, with Germany’s potential fiscal expansion viewed as especially important. Capital markets and IPO reopening (Priority: 4/5): After a sharp slowdown following tariff news, activity is beginning to recover, with recent IPOs pricing well and a broader pipeline suggesting a busier summer if volatility stays contained. Goldman Sachs risk management and strategy (Priority: 5/5): Waldron details Goldman’s holistic risk framework, moderated positioning since April 2, and three-part strategy: client excellence, durable businesses, and operating at scale through technology and infrastructure.

Key Arguments: The U.S. economy is still resilient: consumer spending, employment, and government spending are supporting growth, making recession less likely. Tariff policy created a major shock to corporate planning, leading to a broad pause in strategic investment until the effective tariff rate became more predictable. Many companies are now shifting from pause to adjustment, suggesting more M&A, capital returns, and selective investment may resume. Higher long-term interest rates are a serious macro risk because they can become a drag on growth and reflect bond-market concern about fiscal sustainability. Large fiscal deficits are viewed as unsustainable and require political attention, but there is limited will to materially cut spending. Investor enthusiasm for U.S. assets has cooled, yet the move to reduce dollar over-allocation and increase hedging is still only at the margin. Europe has benefited from hedging and reallocation, but investors still need proof of stronger growth before making a large regional overweight. Goldman is reducing risk exposure modestly while continuing to intermediate client risk, using stress testing, mark-to-market discipline, and extra liquidity buffers. The firm’s strategy centers on better client service, more durable revenue streams, and technology/infrastructure investment to scale efficiently. Leadership in a volatile environment requires more communication, greater presence with clients and staff, and a broader focus beyond commercial revenue to operations and technology.

Data Points: U.S. recession outlook: No recession likely, per Waldron - He says the economy has shown resilience despite widespread recession fears after Liberation Day. Tariff effective rate: 13%-15% - Waldron says this is the range the market may settle into, versus about 2% previously. Starting tariff rate: 2% - Referenced as the earlier baseline before Liberation Day-related changes. Deficit level: 6%+ of GDP - He says the U.S. is running large deficits even in relatively good economic times. Standard deviation of risk intermediation revenues, last 5 years: 6% - Used to show Goldman’s global markets revenues are now more stable. Standard deviation of risk intermediation revenues, prior 10 years: 24% - Comparison period showing significantly higher historical volatility. Management fees: Over $10 billion - Goldman’s asset and wealth management business has grown to this level. Firm revenues: About $54 billion - Used to contextualize the scale of management fees at Goldman Sachs. First quarter capital markets volumes: Up 30%-50% - Capital markets activity surged early in the year before tariff-related slowdown. Recent IPOs priced: About 10 - Waldron says Goldman priced roughly ten IPOs in the last 7-10 business days. Moderator risk positioning change: Reduced since April 2nd - Goldman cut risk exposure after tariff uncertainty intensified. Episode recording date: Monday, June 2nd - Stated at the end of the transcript.

Pivotal Quotes: "I think that we are seeing tremendous resilience in the U.S. economy" — John Waldron: His opening assessment of the macro environment and why recession still seems unlikely. "Liberation Day was a big shock to the system. It was very, very disruptive." — John Waldron: His description of how tariff policy changes altered corporate planning and investment decisions. "I think the bond market is concerned about it." — John Waldron: His warning that rising yields and deficits reflect market anxiety about fiscal sustainability.

Implications: The conversation suggests a transition from panic to adaptation: companies may resume selective investment, but policy uncertainty, deficits, and rates remain the key macro risks. For investors, hedging and disciplined risk management matter more than chasing bold directional bets.