Lawmakers in the U.S. will have more impact on what happens to the economy and markets than the pandemic, Goldman Sachs (NYSE:GS) CEO David Solomon said Tuesday.
Both entities have implemented never-before-seen levels of policy help totaling about $10 trillion since March 2020.
With support from both starting to fade in the days ahead, the leader of the Wall Street investment banking giant said investors should take heed and plan accordingly.
"I don’t believe we’re in a new paradigm where the world will be fundamentally different. But it’s going to take some time to move forward," Solomon told reporters. "In the context of that, I think that monetary and fiscal policy on a go-forward basis will have a bigger impact on the trajectory of markets than the pandemic will from this point forward."
After injecting more than $5 trillion of cash in 2020 and into 2021, Congress recently passed a more than $1 trillion infrastructure bill that will continue to boost spending in the years ahead. However, the fiscal pace will slow considerably from what it had been.
At the same time, the Fed has expanded its asset holdings by more than $4 trillion through monthly bond purchases. But the central bank is slowing that stimulus effort and is expected next week to step up the tapering of the asset purchases, possibly paving the way for interest rate hikes by the spring of 2022.
Investors will be left to resolve how the slowing pace of policy support will fit into the broader picture.
As for GS shares, they sprang $10.66, or 2.7%, to $399.97 soon after Tuesday’s opening bell.
