(Bloomberg) -- Top Wall Street bankers offered up a litany of warnings that recession in the US and Europe is increasingly likely with geopolitical risks further darkening the horizon into 2023.
Economic conditions are going to “tighten meaningfully from here,” Goldman Sachs Group Inc (NYSE: GS ). Chief Executive Officer David Solomon said at Saudi Arabia’s Future Investment Initiative conference in Riyadh.
The Fed has made it clear they’re going to raise to the path target of 4.5% to 4.75% and then pause given there’s a lag effect, he said. But if they don’t see real changes in behavior - labor is still very very tight, for example, “my guess is they’ll go further.”
Wall Street bankers have descended on Riyadh, despite deep political frictions in US-Saudi relations over oil . In a slowing global economy, the kingdom is the fastest growing in the Group of 20 thanks to its oil wealth. Crown Prince Mohammed bin Salman is sitting on his first budget surplus since coming to power, allowing him to channel billions of dollars into stock markets and assets globally, and to plan some of the world’s most ambitious construction projects.
But as the bankers made clear, the kingdom is a rare economy in rude health. Many economists see the US in a recession in the next 12 months as the Federal Reserve’s steep interest-rate hikes take a further toll on demand. In Europe, the energy crisis sparked by Russia’s invasion of Ukraine has led to an unprecedented surge in inflation across the continent, and governments are spending billions of euros to help consumers and businesses as their economies slip toward recession.
“There’s no question that 2023 looks a little dicey,” Franck Petitgas, head of international operations at Morgan Stanley (NYSE: MS ), said at the conference. “It’s pretty safe to say that the US is probably going to have some sort of landing that’s not super soft.”
JPMorgan Chase & Co. (NYSE: JPM ) boss Jamie Dimon, whose bank is expanding in Saudi Arabia, was similarly gloomy as he flagged geopolitics as his top concern.
“The most important thing is the geopolitics around Russia and Ukraine, America and China,” he said. “That to me would be far more concerning than whether there’s a mild or slightly severe recession.”
©2022 Bloomberg L.P.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.