Goldman Sachs CEO: US stock market correction is healthy, no risk of recession in the US economy, and the Federal Reserve is not expected to cut interest rates urgently

In the midst of market turmoil, Goldman Sachs CEO Solomon calmly spoke out. He recently stated that the recent pullback in the U.S. stock market may still be healthy. He believes there is no risk of a recession in the U.S. economy and expects the Federal Reserve to avoid taking emergency rate cuts, with the Fed likely to cut rates once or twice in the autumn of this year.

Goldman Sachs CEO David Solomon analyzed and predicted the recent U.S. economic and market situation in a dialogue with the media.

Solomon expects the Fed to avoid taking emergency rate cuts because he believes the U.S. economy is steering clear of a recession. "I don't think you'll see any changes before September. The U.S. economy will develop steadily, and we are unlikely to see a recession."

Solomon's latest remarks come amid global stock market turmoil. Last Friday, U.S. non-farm payroll data showed a greater weakness in the U.S. labor market than expected. In addition, over the weekend, it was revealed that Warren Buffett, the Oracle of Omaha, had cut about half of his largest holding, Apple, and popular arbitrage trades were unwound, leading to extreme market panic. This Monday, global markets experienced a "Black Monday".

Some Wall Street investment banks, along with some investors, have increased their bets on the Fed taking rate cuts before the September regular meeting. The derivatives market briefly reflected a 60% chance of a rate cut by the Fed within a week. Although the market has regained some calm, investors now believe there is little chance of the Fed taking rate cuts before the September meeting, but they still expect the Fed to cut rates by 50 basis points at the two-day FOMC meeting ending on September 18.

Solomon's expectations for the Fed rate cuts are not as aggressive. He stated, "Based on the economic data we are seeing now and the information from the Fed, I think we may see rate cuts once or twice in the autumn." Solomon had previously stated that the market was too optimistic about the pace of rate cuts, even hinting in May that the Fed might choose not to cut rates this year, but later softened his stance.

Solomon mentioned the impact of the Bank of Japan's decision last week on the market: the Bank of Japan decided to raise interest rates, forcing many investors to exit so-called carry trades, where they borrow at low rates in Japan and buy high-yield assets elsewhere.

According to strategists at Morgan Stanley, as the yen is still undervalued, there is even greater room for unwinding related carry trades.

Solomon pointed out that many investors had expected a soft landing for the U.S. economy, but after the non-farm payroll data was released last week, some began to hedge against this prediction. Regarding the July employment report, Solomon believed the data was not bad, just weaker than expected.

Goldman Sachs economists have raised the likelihood of the U.S. falling into an economic recession next year from 15% to 25%.

Solomon also stated that as the market readjusts to new economic data and revises expectations for Fed policy, this volatility will continue for some time. "I do believe that after the market has experienced a very strong rally, we are going through an adjustment, which may be healthy. I think in the short term we will see more fluctuations. This is a quite significant adjustment." "**