Red Alert! Initiate "Risk Control," Goldman Sachs is out
In the face of the shockwaves from Trump's tariffs and the looming trillion-dollar deficit, Goldman Sachs has taken the lead in activating its risk control mechanism—proactively reducing risk exposure and accumulating liquidity reserves. President Waldron has warned that the U.S. economy is likely to fall into a "slow inflation" quagmire (slowing growth with rising inflation), and he, along with financial giants like Jamie Dimon, has jointly sounded the alarm that the deficit is "unsustainable." Amid the spreading concerns in the bond market, Goldman Sachs' clients have begun to reduce their overweight in U.S. assets and accelerate their hedging against dollar risks
When Wall Street's most influential investment banks start to hit the brakes, the market should get nervous.
Faced with unpredictable tariff policy storms and rising deficit concerns, Wall Street financial giant Goldman Sachs is rarely choosing to "turtle" — reducing risk exposure, hoarding cash, and striving for self-preservation.
According to a report by the Financial Times on June 5, Goldman Sachs President and COO John Waldron revealed in a podcast released on Thursday that since Trump announced comprehensive tariffs on trade partners on April 2, the bank has "moderately adjusted our risk positions." Waldron stated:
Whenever there is an opportunity, we will reduce risk and try to keep our business operations and capital investments closer to familiar and stable foundational areas.
He indicated that this reduction in risk appetite will mainly be reflected in capital market operations and the process of providing trading convenience for clients. He explained that Goldman Sachs will "value liquidity more, retain more buffer capital," and adopt a more balanced strategy rather than being overly aggressive.
As the second-in-command at Goldman Sachs, Waldron is widely regarded as a strong contender for the next CEO.
"Slow Inflation" Warning: Slowing Growth and Rising Inflation
In an interview with the Financial Times, Waldron further elaborated on his judgment of the economic outlook. He anticipates a "slow inflation" scenario — a growth rate of 1% to 1.5% combined with a 3% inflation rate.
However, Waldron does not expect a severe economic recession.
I do not believe a recession will occur. This is not stagflation; it is much milder than the high inflation and economic stagnation experienced in the United States in the 1970s.
Although Goldman Sachs and other Wall Street banks benefited from market volatility triggered by Trump's tariff threats in the first quarter of this year, leading to significant increases in stock and bond trading revenues, policy uncertainty has begun to weigh on investment banking activities, causing companies to delay investment and merger plans, resulting in declines in merger advisory and equity issuance fee revenues.
Debt Alarm: Wall Street Giants Speak Out Collectively
Waldron joined the ranks of Wall Street giants, including JP Morgan CEO Jamie Dimon and BlackRock CEO Larry Fink, in warning about the outlook for U.S. deficit spending. He stated:
Reducing the deficit is a top priority for us. The deficit is becoming quite large, and I believe it is unsustainable if we continue at this pace for the foreseeable future.
When asked whether investors are pulling out of U.S. assets due to concerns over tariffs and deficits, Waldron revealed that Goldman Sachs' clients are seeking to "reduce their overexposure to U.S. assets" and hedge their dollar exposure.
He warned:
From a fundamental asset allocation perspective, I think this is just a marginal behavioral change. But if the destructive nature of the policy persists for a longer time, we are more likely to see more significant changes
