Goldman Sachs more concerned about inflation than COVID-19

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Goldman Sachs GS,
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CEO David Solomon said on Tuesday that monetary policy is likely to have a greater impact on markets than the pandemic as central banks around the world take steps to tackle inflation. Solomon told CNBC that flare-ups such as the Omicron variant could affect markets in the short term, with Goldman Sachs expecting the economy to continue to recover in 2022 and beyond. Solomon said it’s unlikely the S&P 500 SPX will have a double-digit percentage gain,
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The past three years will become the norm in the years to come. “I don’t believe that as an investor you should expect double-digit equity returns to compound permanently,” he said. He said monetary and fiscal policy remain important amid volatility in the market around inflation and monetary policy by the US Federal Reserve. “We have had unprecedented monetary and fiscal policy for a meaningful time and we are going to emerge from it and open it up,” Solomon said. “It’s going to have a big impact on asset prices, market activity and a lot of things. It’s going to have an impact on things as we open it up and find balance.” Looking ahead, the bigger unknown is whether monetary policy makers can ease inflationary pressures without a sharp decline in the market. “What we don’t have the answer for is can it be done in a seamless way, where we get a little bit of air out without a lot of bumps and instability, or are we going with some bumps and instability. Is it the way?” Solomon said. Solomon’s remarks came as bankers gathered for the Goldman Sachs Financial Services Conference. Wells Fargo WFC,
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CEO Charlie Scharf urged the Fed to move more quickly to contain inflation. “Inflation is very, very real,” Scharf said, as reported by Reuters. “Prices for inputs are quite high in most industries. Labor shortages and wage increases are extremely real. Whether it continues for several years is not all that relevant, but it will certainly have an impact over the next year or so. “

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