David Solomon Is Less Optimistic About The Economy
David Solomon, the chief executive of Goldman Sachs, said that the company would have to cut back on spending and hiring as it copes with a slowing economy. Speaking at The Wall Street Journal's CEO Council Summit, Solomon said the idea shouldn't be shocking given how tightly the company's expansion is connected to the state of the world economy.
- Many corporate executives have cut back their expectations this year as a result of the stock market's collapse, the conflict in Ukraine, and the Federal Reserve's effort to combat inflation by raising interest rates
- Overall bank profits, including those at Goldman, have decreased as a result of the deal-making slowdown in IPOs and M&As
- The Wall Street behemoth planned a significant restructuring in October with the goal of reducing the company's reliance on the up-and-down industries of deal-making and trading
Jamie Dimon Is Also Pessimistic
Consumer spending is remaining stable thanks to the extraordinary government assistance during the pandemic, but inflation and rate increases are "eroding everything," the CEO claimed. The CEO predicted that the high levels of consumer spending seen in 2022 would not last for very long and emphasized the risk that rising interest rates pose as the Fed attempts to control inflation.
- Among the "storm clouds" Dimon is keeping an eye on are the geopolitical turmoil of this year, particularly the conflict in Ukraine and strained trade relations with China
- He pointed out that, as the dollar increases, international trade for commodities like oil will continue to cost more because weaker currencies are compelled to make up for the difference
GM's, Walmart's and Union Pacific's CEOs Are Also Prudent
The automaker GM is moving cautiously in order to be ready for a potential fall in demand, similar to what other industries have experienced. Mary Barra, GM's CEO, stated that GM is budget-wise planning for "a reasonably conservative 2023" but that she is still observing "pent-up demand" remaining from the pandemic.
- While purchasing is still high at Walmart, Doug McMillon, Walmart's CEO, has noticed more cautious spending in some areas, such as toys and electronics
- Although Walmart's staffing problems from the pandemic have started to improve as a result of salary increases, McMillon indicated that there is still a hiring crunch at the cashier level. He insured that Walmart would not implement staff reductions in the event of a severe recession
According to Union Pacific Railroads CEO Lance Fritz, shipping is slowing down, which suggests that consumer spending is declining and the financial system is becoming tighter.
“The Fed is trying to hit all of us in the line of fire with a slower economy and hurting demand. It’s not good,” Lance Fritz for CNBC
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