David Solomon, CEO of Goldman Sachs, has shared his views on the measures that the Federal Reserve could take. He said he did not expect the Fed to take any emergency measures to calm the markets before September. "Based on current economic data and Fed communications, we are likely to see one or two rate cuts in the autumn," he said.

Solomon attributed the Black Monday crash, in which the Dow Jones lost around a thousand points, to several factors:

  • A weaker-than-expected US jobs report. Although it was not catastrophic, it surprised market players who were expecting a soft landing for the economy.
  • The Bank of Japan's decision to tighten monetary policy led many investors to unwind their positions, particularly those involving borrowing in yen to invest in US Treasuries.
  • On the other hand, he mentioned that some investors had positioned themselves inappropriately in relation to volatility, which necessitated a rapid adjustment, leading to a significant rise in the VIX, the market volatility index.

Despite this turbulence, Solomon sees the current correction as a healthy response to a period of strong growth.

The probability of a recession has been raised slightly by Goldman Sachs economists, from 15% to 25%. However, Solomon remains optimistic about the economy's ability to maintain growth, although the risk is never zero.

As far as interest rates are concerned, he expects one or two cuts in the autumn, depending on the economic data to come, but stresses the importance of waiting and observing economic developments and the additional data that will be published in the months ahead.

Bloomberg videos, provided by MT Newswires