Squawk on the Street
Squawk on the Street+ Goldman Sachs President & COO John Waldron 5/9/24
electricity a big idea that's inspired countless new ones from powering the light bulb to virtually powering our entire lives 30 years ago State Street launched the spider S&P 500 ETF spy a big idea that inspired the world to invest differently and still does what can you do is spy before investing consider the funds investment objectives risks charges and expenses visit s g a dot com for a prospectus containing this another information really carefully before investing spies subject to risks similar to those of stocks only TS are subject to risk including possible loss of principle routes distributing distribution we are a goldman at their professional investment forum uh... which is brings together about a hundred c_e_o_s and c_i_o_s from across the wealth management industry they're gathering here in the lower west side representing nearly a trillion dollars in a u_m_ and our next guest joins us before speaking at the conference at this afternoon we're very pleased to welcome actually they're welcoming us uh... goldman's president c_o_ john walter john thanks for having us over i crawl thanks for coming out of office we appreciate i'd love to know first of all the strategy behind the forum and then what kind of feedback you're hunting for today sure so this is our inaugural forum focused on r_i_a_s which is an increasingly important client base for goldman's acts we've obviously been the wealth management business a long time our focus historically as an adviser has been much more the ultra high net worth segment we're servicing the r_i_a_ segment more so as a holistic provider of comprehensive solution so we're inviting this group into our offices to have a forum talking about our views on markets our views on policy our views on interest rates any of the topics you'll your your viewers will want to hear about but also how goldman's acts can offer solutions to to help them achieve their objectives and to serve their client base which are really high net worth wealth uh... investors who are growing significantly in the in the in the united is it a is it a tell about where goldman sees opportunities for growth percent the fear absolutely do the forum is focused on that high net worth segment of wealth in the united states and obviously there's been enormous wealth creation this country over long periods of time but if you look at the last ten or fifteen years the company will growth rate of this category we think is about ten percent which is meaningfully higher than other categories in wealth and so there's an enormous amount of wealth being generated in this country in that kind of one to ten million dollar net worth category and goldman sax is really well suited to serve that that that group of investors in the r_a_s_ that are advising those investors with all the comprehensive capabilities that we have we call a one goldman sax platform of course the street still remembers uh... you're very strong q one uh... and i know there were some upgrades in the days that followed that argued this is the kind of environment in which a franchise like goldman's shines of the things that are clicking is it equity underwriting is it both management is it something else well i would say is is is you know we've been very focused on clarifying our strategy and getting kind of back to the things that we do really really well i like to call it goldman sax being goldman sax and really if you think about our capital markets franchise is a best-in-class franchise the capital markets activity is starting to get better and better it's taking some time it's better on the death side than it is in the equity side but we've done some of the IPOs of late that have gone really well and we're starting to see that kind of get more momentum which is a good thing to see and obviously we're large intermediaries in the financial markets and as you get more activity in in global markets whether it's in rates or credit or mortgages or the like there's a lot of activity that we can benefit from being the intermediary and that and that realm and then we have built a much bigger financing machinery at the firm so the firm historically was much more intermediary and markets and less of a financier and over the last five years we've really materially grown our financing capabilities and footprint and we're much larger now as a finance area if you think about all that secular growth and assets that are coming into the marketplace they all have to get financed on some basis some get finance at a higher attachment point some get finance or a lower attachment point but that's all opportunity for us to be a much more important financier to our clients which is driving and propelling our business for sure for those who are zeroing in on on IPOs there've been some charts that as you just point out there's been some activity others argue it's not like S1's are blowing the roof off and we had a discussion this morning about whether or not there's a window that we're in which it needs to happen significantly before say the summer or before the election you go along with it well i would observe the following the the first wave of IPOs as the market reopened were were priced at a pretty high level on a relative basis of the secondary comps and it was a little bit of a struggle to get them to perform well this last set of IPOs that we and others others have been doing have been priced at more of a discount to where the prevailing secondary market lies which anytime you reopening the IPO market that's generally the way to start to reopen is to get pricing to a place where there's reasonable value to be had to take the risk to buy an IPO versus just buying the secondary those deals are performed a lot better and then as i think starting to generate some momentum so i don't think that there's a window i don't subscribe to the theory that there's a narrow window it has to be before the election there will be i think a lot of IPOs done this summer because i think people are seeing that momentum building and the secondary market is performing and people are are now seeing that i can actually get a company public and it will trade well and i can feel more comfortable that that the transaction will go well the first set of transactions were a little bit tougher this set of transactions better and i think that's giving people more conviction you get us you get us sometimes about the consumer and the macro and i know you used to run the media group in n_i_b_ here and you you look at things like advertising and we've been through an earning season here where guidance has been a little checkered have you been able to fair it out any clues on that front well our observation is the consumer is still pretty strong the spending levels are pretty strong in this country i think the u_s_ consumer continues to propel the economy forward uh... it's a it's an extraordinary uh... demand driver in the world uh... there is definitely weakness you know kind of in the lower level you can see and i see with some of the earnings that are coming out those that serve that lower quintile of the u_s_ consumer are definitely making it clear to all of us that there's a bit more weakness in there but i think when you go to the kind of mid-level of the consumer that eighty ninety hundred thousand dollar household earner they're still spending those numbers are still strong the data still suggest that that that the the consumer demand is healthy and i think that continues to drive g_d_p_ growth so we don't see any evidence of real weakness in there we're still subscribers to generally speaking a soft landing scenario you know i would say soft landing doesn't mean everything is perfect and it lands very soft and nice pillow sometimes you have a little bit of fits and starts in the soft landing i think that's kind of what we're seeing right now i was taken by comments you made at a semaphore conference in april about the debt uh... and uh... demand for treasury auctions and leverage in the treasury system and looking at the u_k_ trust budget as a cautionary tale can you expand a bit on that how how serious how much do you see rhyming between the u_s_ in an episode like that well what i was referring to is the absolute stock of treasury in the marketplace today has grown considerably the u_s_ government continues to spend i would argue both parties are showing very little discipline in the context of spending and fiscal stimulus in the economy now fiscal stimulus was needed when we were coming out of the pandemic but i think we went too far and we continue to go too far and i think that while we are the reserve currency and we have the ability to benefit from being the reserve currency we should not abuse that privilege and i think at this point we're getting to a place where it's getting riskier we have a very low unemployment and yet very high fiscal spend worry to have higher unemployment and we actually need more stimulus we may have less running room and you're very reliant now with with less buying a foreign governments of u_s_ threat treasury stock you're very lying on the u_s_ households to continue to fund u_s_ treasury so we worry about the the validity and veracity of these auctions we worry about whether u_s_ households will continue to buy and we worry about the price that they will demand to continue to buy and i think that i i just wish the government on both sides of the aisle would pay a bit more attention to that and be a little bit more disciplined as they think about the spending for uh... for u_s_ but you think that's a winning political message in an election year would we have to wait for a new term it may not be a winning political message but you know frankly my focus is less than what's a winning political message and more and what's right for the system and what's right for markets and what's right for the economy and i think that we're we're playing with fire and i wish we weren't doing that you also point out that on that front the chinese have withdrawn a bit you're on the u_s_ china business council i wonder how you judge relations right now that there appear to be very very engaged uh... with with c_e_o_'s in the treasury secretary and blinkin and yet we have these skirmishes over things like technology yeah look i think the relationship is fundamentally changed it's it's it was a different relationship back many years ago where it appeared that everybody thought that china was coming into the global system in a very seamless fashion and that's obviously in a different place today i give the by demonstration a lot of credit i think i've done a good job re-engaging and finding ways to lift the relationship up from what was a pretty low-level and i think that series of engagement over the course of the last six nine twelve months has been very productive obviously leading up to the summit that the two presidents had and i think that's a good thing for for both countries because these are the two most important countries in the world they have to be speaking to each other they don't have to agree on all matters or even many matters but you have to continue that constructive engagement i think that that that's happening now which i think is a much more positive direction that we had several months ago i don't want to add i had state to get to political but yesterday the president did say on c_n_n_ that he didn't think his opponent would accept the results if he lost and i'm not asking it away on the in on that but i wonder our desks beginning to think about what a trade might look like in that environment well i i don't want to weigh in on the u_s_ presidential election uh... nor do i want to weigh on on who's going to accept or not accept the results but i think back to your question on on you know the trust budget and that and the l_d_i_ situation in the u_k_ that the concerns that i would have a we would have would be around something that looks like more of a political crisis in america coupled with a lot of leverage in the treasury system coupled with the the need to continue to borrow given our continued spending and those those sorts of elements that you have that i think we need to be paying attention to finally i wonder if you'll entertain of the requisite question about a i and to what degree it is showing up in either productivity or cost reduction or headcount are we getting are things beginning to pop up we're very bullish on a i with this this i think is going to be a very significant investment super cycle you know bit of a maybe a bit of an industrial revolution if you will in the in the country and in the world uh... we're using it ourselves we're we've been using a i and machine learning for quite some time now we've seen good productivity gains there generative a i is giving us a whole nother opportunity set which i think is still in the very early stages of the amount of generative a i that we're using today to really drive productivity is pretty limited but i think it's it's coming fast and we're gonna make a lot of progress in the next handful of years and then from a business standpoint we seen enormous amount of opportunity to help companies and help uh... nations in many respects put capital to work to figure out how to be driving that capability set whether it's in terms of g_p_u_s or in terms of its infrastructure power all the elements that will go into this so it's a big opportunity from a financing standpoint we're going to play a very big role in our financing business and we think from a goldman stock standpoint as with many companies we will drive a lot of productivity it will take some time you need very good and clean data to execute on all this compute power and so there's a lot of work that a lot of companies ourselves included have to undertake to make sure that we have that clean layer of data which i think is something that is not as well understood there are real power constraints it is becoming more well understood in your network among others are doing good job i think describing that so they're going to be fits and starts but this thing is going i think in a very positive direction john re-appreciate your hosting us uh... and congratulations on the forum we'll be looking for headlines out of that as well thank you thanks for being here i don't want a goldman sex before they were team u_s_a_ they were kids trading recess for reps and summer vacations for travel tournaments all for one chance at gold stream the olympic games with fast Wi-Fi wherever you go on exfinity mobile get the fastest connection at paris with exfinity proud partner of team u_s_a_ now through september twenty first exfinity internet customers can buy one unlimited line and get one free for here learn more at exfinity dot com slash team u_s_a_ restrictions apply spindy internet service and to no limited lines required for the speed of thirty gigabytes of usage per line beneficial to me very [BLANK_AUDIO]