• Goldman Sachs (GS) CEO David Solomon asserts the U.S. economy is "performing well," citing robust consumer spending and strong corporate investment.
  • Despite GDP growth slowing to 1.5% in Q2, record Q2 earnings at Goldman ($20.34B revenue) and a buoyant capital markets environment support his optimism.
  • Risks remain: sticky inflation (PCE 3.7%), cooling labor market, and potential trade and geopolitical shocks could temper the outlook.

A Strong Economy? Solomon's Take

In a recent statement, Goldman Sachs CEO David Solomon described the U.S. economy as "performing well," a view echoed by the bank's record second-quarter results. Goldman reported net revenue of $20.34 billion, up 39% year-over-year, and EPS of $20.98, up 92%. The bank's deal backlog is at its highest in five years, with strength in equities, fixed income, and investment banking.

Solomon's optimism aligns with data showing consumer spending grew at a 3.4% annualized pace in Q2, cushioning a slowdown in GDP growth to 1.5%. Business investment also surged 8.4% annualized, driven by AI infrastructure spending. "We see continued expansion, resilient consumer spending, and strong investment, especially around AI," Solomon noted.

Crosscurrents and Cautions

However, the picture is not uniformly rosy. Inflation remains above the Fed's 2% target, with July PCE at 3.7% year-over-year and core at 3.3%. This keeps the Fed in a restrictive stance, with markets pricing in potential further tightening. The labor market is cooling: payrolls fell by 23,000 in July, and unemployment edged down to 4.1% only because labor-force participation declined.

Consumer confidence also weakened in August, with the Conference Board's index dipping to 89.4 and expectations falling to 68.2. "The consumer is still spending, but there's underlying stress," said an economist familiar with the data.

Policy and Risks

Trade policy remains a wildcard. New tariffs and geopolitical tensions could disrupt supply chains and raise costs. Higher long-term yields, with the 30-year Treasury at its highest in two decades, are a concern for leveraged borrowers and real estate.

Goldman's own adjusted outlook reflects these risks. Solomon himself acknowledged potential "bumps and recalibrations" in the AI investment cycle. Still, the base case remains moderate growth, with the Conference Board projecting 1.9% GDP growth for 2026 and 2027.

Sun Belt and Beyond

Goldman's performance is not just a macro story; it's also about strategic focus. After retreating from consumer banking, the firm has doubled down on its core strengths. "Our record results reflect our leadership in investment banking and trading," Solomon said.

The bank's global reach is a plus, with strong client activity in Asia. But any escalation in trade wars could hit that growth.

The Bottom Line

Solomon's "performing well" is defensible if consumer and business spending hold up. But with inflation sticky and hiring cooling, the road ahead is anything but smooth.

Correction: An earlier version of this article stated that Q2 GDP growth was 2.1%, but it was subsequently revised to 1.5%.