In Sharp Contrast to Plunging Korean Stock Market: "Even Amid US-Iran War, Market Reaction Is Calm; Impact Will Take 2-3 Weeks to Absorb"

David Solomon, CEO of Goldman Sachs
"U.S. Financial Markets Respond Relatively Calmly"

David Solomon, Chief Executive Officer (CEO) of Goldman Sachs, stated that despite the war in the Middle East, financial markets have shown a relatively calm response, predicting that it will take investors a couple of weeks to fully absorb its impact.

David Solomon, Chief Executive Officer (CEO) of Goldman Sachs. Photo by Bloomberg

According to Reuters, CEO Solomon said in a speech at an event in Sydney, Australia, on March 4 (local time), "Given the scale of this situation, it is actually surprising that the market response has been calmer than expected."

Despite the outbreak of war between the United States and Iran, the New York stock market remained composed. On March 3 (local time), the Dow Jones Industrial Average at the New York Stock Exchange (NYSE) closed at 48,501.27, down 403.51 points (0.83%) from the previous trading day. The S&P 500 index, which focuses on large-cap stocks, fell 64.99 points (0.94%) to 6,816.63, while the tech-heavy Nasdaq index ended at 22,516.691, down 232.167 points (1.02%) from the previous session.

He added that unless geopolitical events have a direct impact on economic growth, markets tend to show a generally limited reaction.

He also explained, "If all the things happening right now accumulate, a much stronger market reaction could occur. However, so far, such cumulative effects have not materialized," adding, "For now, there are too many uncertain factors, so it is very difficult to predict the situation."

He said, "It will likely take the market a couple of weeks to fully digest what this crisis means in the short and medium term," and noted, "It is difficult to predict how the outcome will unfold." He further mentioned that several factors, including the current accommodative monetary policy stance and significant easing in regulatory practices, have helped keep the U.S. economy in a resilient state.

Solomon also expressed an optimistic outlook for U.S. economic growth. He emphasized, "If we set aside the situation unfolding in the Middle East for a moment, I think the U.S. growth trajectory is quite attractive, as strong macroeconomic tailwinds are acting simultaneously."

However, he acknowledged, "There is certainly a reasonable possibility that the U.S. economy could overheat somewhat this year," and when asked whether inflation could be slightly higher than market expectations in that case, he replied, "Yes."

He also stated that, thanks to the resilience of the U.S. economy, private credit portfolios are "overall in pretty good shape." However, he expressed concern that if a slowdown appears in the long-term credit cycle, lending standards could weaken.

He pointed out, "As competition to deploy capital intensifies, lending standards tend to loosen," and added, "If an economic slowdown or recession occurs, areas where lending standards have weakened will become more apparent."

This content was produced with the assistance of AI translation services.