Goldman Sachs CEO David Solomon discussed a potential recession, linked to trade war uncertainties, during a meeting with analysts. He noted that firms are struggling to plan for the future due to a changing operating environment and slowing economic growth.
New trade policies implemented by Trump have altered global growth prospects. Clients of Goldman Sachs are concerned about near-term and longer-term uncertainties affecting decision-making capabilities. This uncertainty presents a material risk to both the US and global economies.
Importance Of Risk Management
Risk management is vital when buying and selling financial instruments across different time frames. Current conditions make strategic decisions like building factories and opening new outlets more challenging. Solomon emphasised these points to underline the extent to which economic activity is slowing worldwide.
What has already been discussed is fairly straightforward: Solomon, looking at the direction markets may take, pointed squarely at trade tensions as a primary factor dragging on confidence. It’s not mere speculation but rather a clear observation that companies, under current conditions, are putting major capital decisions on hold. Whether it’s expanding operations or committing to long-term projects, there’s real hesitancy stemming from policy unpredictability.
Global trade policies introduced under the Trump administration have already shifted assumptions about international cooperation and access to markets. That shift hasn’t been minor. For institutional clients, this means models used to evaluate cross-border risk and economic exposure have needed to be adjusted. We’ve seen that altering those models doesn’t happen overnight—it’s both resource-heavy and analytically complex.
From our side, what stands out is Solomon’s point about companies facing constraints in forecasting. If your forward view is unclear, then any position taken over longer time frames becomes layered with uncertainty. For those of us relying on volatility to price risk efficiently, that loss of clarity creates inefficiencies. We can’t strategically commit unless we can properly value possible outcomes. It’s not fear; it’s function.
Pay close attention to Solomon’s implication that there are not just headwinds in the next quarter but potential misalignments between expected and actual macro outcomes down the line. It wasn’t an emotional warning, just a data-informed projection reflecting what’s already visible in corporate behaviour.
Strategy Perspective Under Cautious Macro Tone
From a strategy perspective, the slowing in business activity doesn’t just affect broader economic figures. It compresses ranges and limits directional conviction. Position-taking in these conditions requires more flexibility—not less—especially across shorter expiry profiles. With anticipations shifting weekly, we need to remain clear-eyed about implied probabilities versus realised outcomes.
Solomon also echoed what we’ve observed around a scaling back of growth exposure globally. The ability for certain sectors to absorb risk has narrowed. Liquidity gaps in some instruments aren’t obvious yet, but are beginning to widen under the surface. That’s useful context when structuring multi-leg positions or evaluating the slope of forwards.
As the macro tone stays cautious, we’re inclined to engage selectively, rotating exposure across currencies and durations with tighter risk bands. It isn’t a question of stepping away, but of working more tactically. Maintaining optionality while limiting drawdown exposure has arguably never been more appropriate.
And yes, there is a material part of the market still priced for outcomes that assume conditions normalise. That mispricing is precisely where opportunity may present itself. One-sided consensus tends to create pockets of overextension.
Solomon’s framework helps reinforce an approach grounded in probabilities, not narratives. The moment actions deviate too far from data, positioning might need swift recalibration.
