Goldman Sachs CEO David Solomon said Thursday he expects capital markets to recover in the coming months.
“I think what we’re going through right now is a rebalancing of valuation expectations,” he said in an interview with CNBC’s Jim Cramer. “In the coming months we will see a small reopening in capital markets as people adjust to this valuation adjustment.”
While a low interest rate environment allowed start-up companies to thrive and see their valuations soar in the early stages of the pandemic, the IPO market plummeted this year. According to EY and Dealogic, US-listed companies generated revenue of $4.8 billion in the first half of 2022, compared to $155 billion in 2021.
The main culprits include rising inflation, US Federal Reserve rate hikes, Russia’s invasion of Ukraine and Covid lockdowns, which drove investors out of risky high-growth bets and into safer defense stocks.
As these headwinds continue, Solomon says the market is adjusting to its new reality.
“There’s always a backlog of companies that need to go public,” he said. “Three quarters of us find ourselves in a more difficult capital market environment. History would tell you three, four, five, six quarters you’ll get that readjustment.”
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