Taking in the coming ‘cocktail of change’ related to the economy

It may be a great parlor game to predict rate cuts and other elements that might stimulate economic growth. That said, “nobody really knows,” according to David Solomon, chairman and CEO of The Goldman Sachs Group Inc. “For all those speculators that are looking forward six, nine, 12 months and saying, ‘This is what we’re going to see,’ there are so many variables that could impact that, I don’t really know how people speculate that way. But people do.”

At NRF 2025: Retail’s Big Show, Solomon joined Matthew Shay, president and CEO of the National Retail Federation, for a conversation that touched on the overall resilience of the U.S. economy, market reactions to the recent jobs report, deregulation, immigration, tariffs, inflation and uncertainty about policy decisions of the coming administration.

“You’ve got this cocktail of change, some of which could be quite constructive for growth, some of which has the potential to slow growth,” Solomon said. “I think the thing we have to watch very carefully is how it’s all balanced.”

There’s all sorts of data to look at, “but I think you’ve got to start from the base that the U.S. economy has been incredibly resilient over the course of the last few years,” Solomon said. “And it’s complex, because we had an enormous amount of disruption with the pandemic. Part of the strength of the economy has come from the fiscal expansion that was really the counterbalance to the policy decisions we made during the pandemic.”

One of the reasons the economy has been more resilient, he said, is that the fiscal stimulus has had a longer “tail lag” to keeping the economy going.

“I was wrong about this,” he continued. “If we were sitting here 18 months ago, I would have told you that, with inflation pushing up and a clear direction of travel for tighter monetary policy, for more constrained monetary policy, the chance of our having an economic slowdown was high.”

That said, there’s no question that the economy is now in a more fragile place. “Inflation has taken a toll, and it has affected average consumers meaningfully,” he said. “Inflation is cumulative, and things are more expensive.”

There’s been progress in terms of goods, but services inflation is still quite high. Inflation is stickier, he said, and “we don’t have the capacity to spend the way we’ve been spending forever.”

There’s also an administration coming in that has talked about wanting to tighten spending momentum. “All of that has to be balanced very, very carefully to keep the economy chugging along the way it has been.”

The session also briefly explored opportunities outside of the U.S. market. Decades ago, there was a general perspective on making things wherever it was cheapest to make them, and then to sell them wherever they can be sold at the highest possible margin.

“One of the things the pandemic did — and also some of the geopolitical tension that’s escalated over the course of the last five years — it’s allowed us to think more strategically about supply chains,” Solomon said.

“It’s allowed us to think more strategically about certain resources, and certain needs.” That creates different bilateral relationships, “and changes the way we think about certain things.”

It's important to be thoughtful, he said. “These are complex issues. They’re not simple.”