– Also: The global housing market might have further to slide.
- Will tighter lending act as a substitute for Fed rate hikes?
- “Concerns about some of these banks are getting amplified in ways that we just haven’t seen in the past, via social media.” — Our Exchanges podcast examines how technology has changed bank runs.
- And Goldman Sachs’ 10,000 Women program celebrates its 15th anniversary.
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Our economists also expect stress on small and midsize banks to result in tighter lending standards, which they estimate will impose a 0.25 to 0.5 percentage point drag on GDP growth, equivalent to the impact of 25-50 basis points of rate hikes, Chief U.S. Economist David Mericle wrote in the team’s research note. While Goldman Sachs Research thinks the pressure on banks has increased the chances of a recession, our economists’ baseline economic forecast is stronger than the FOMC’s: They expect GDP growth of 1.2% in 2023 (on a Q4/Q4 basis) instead of the FOMC’s 0.4%, and they expect the unemployment rate to remain unchanged at 3.6% instead of rising to 4.5%.
Goldman Sachs economists also left their forecast for the peak funds rate unchanged at 5.25-5.5% and now expect additional 25 basis points rate hikes in May and June. Their baseline forecast is 25 basis points above the Fed’s forecast of 5-5.25%.
The rapid shift in bank deposits also illustrates how technology has changed the banking sector since the financial crisis in 2008. Silicon Valley Bank and First Republic each lost around 30 to 40% of their deposits in a short period of time, Ramsden says. “Today you can move cash seamlessly and almost instantaneously between institutions, and there really is not a lot of friction,” he added. “Concerns about some of these banks are getting amplified in ways that we just haven’t seen in the past, via social media, and that is obviously resulting in these much more pronounced deposit runs than we saw even in the global financial crisis in 2008.”
After a surge in housing activity during the pandemic, home sales pulled back sharply in the second half of 2022, when rate hikes enacted by central banks caused mortgage rates to spike in most developed market economies. A contraction in housing starts, sales and prices has persisted this year and “shows little sign of stopping,” write Goldman Sachs economists Joseph Briggs and Giovanni Pierdomenico. Recent financial turmoil has increased uncertainty for the housing outlook as ongoing pressures could cause smaller banks to tighten lending standards, despite declines in long-term yields.
To mark the 15 year anniversary, we invited 15 trailblazing entrepreneurs from each graduating year to travel to New York and Washington D.C. for our Growth Fellowship program. Over four days, the fellows received coaching, mentoring, and networking from Goldman Sachs employees, all with the goal of business growth.
Some of our leaders reflect on the event and the milestone below:
- David Solomon, chairman and CEO — “The program has now provided business and management education, mentoring and access to capital for more than 200,000 women entrepreneurs across over 150 countries… I’m very proud of this initiative, which has far exceeded its initial target of $600 million in investments.”
- Asahi Pompey, global head of Corporate Engagement — “Nothing fills me with greater optimism than meeting with our 10,000 women graduates. They are the future to a thriving, inclusive economy and we are honored to be on that journey with them.”
- Charlotte Keenan, head of the Office of Corporate Engagement International and global head of 10,000 Women — “The 15 phenomenal women entrepreneurs hail from eight countries around the world, and every single one of them is pushing the boundaries of innovation and creativity — they are the future of entrepreneurship and we are with them every step of the way.”
- Michael Horvath, the CEO and co-founder of Strava, has helped transform his business into one of the leading digital fitness platforms in the world, with more than 100 million registered users of the app. In recent years, Strava has zeroed in on its subscription business to ensure success, Horvath says. “You have to decide what you’re going to be best at and do that,” he says. “And you have to get an A in it — you can’t get Bs.”
- For adventure athlete and filmmaker Jimmy Chin, being diligent isn’t just a choice, it’s a matter of life and death. He recounts not only surviving a massive avalanche but also the importance of preparation and managing fear correctly. “When you know that the potential outcome could be fatal and you still choose to do something, you’re living a life with deep, deep intention,” Chin says.