There are no certainties. Just probabilities. Time goes by. And our expectations are adapting. “The worst is yet to come”, warns us the International Monetary Fund (IMF). Jamie Dimon, CEO of JPMorgan Chase, anticipates a “storm” and describes the situation as “very serious”. Jeff Bezos, former CEO of Amazon, has also expressed an opinion along the same lines. Y David Solomon, CEO of Goldman Sachs, tells us that “there is a good chance that we will have a recession in the United States”.
The income of the big banks has been falling sharply during this economic cycle. Due to the collapse of prices in the stock markets, it could be said that investment banking has not been at its best.either. Comparing to last year, in terms of revenue, JPMorgan Chase is down 17%. Citi has fallen by 25%. Morgan Stanley has fallen by 29%. And Goldman Sachs has fallen by an outrageous 43%.
Goldman Sachs has been the ugly duckling of this group. And it has been thanks to its emphasis on investment. With Marcus, the bank now intends to enter the world of payments and consumer loans. Thus, balance the scales. His approach to investing has served him well in good times. However, this setup hasn’t been working so well lately. His degree of specialization is costly. You don’t have to be a genius to know that Goldman Sachs needs to diversify its business. Of course Marcus, its online consumer banking, is still not profitable enough to cover lost revenue in its other areas.
David Solomon, CEO of Goldman Sachs is seeing a “good chance of a recession.” And he anticipates “a lot of volatility on the horizon”. Therefore, he recommends caution for investors. In other words, you have to be prepared. And this recommendation is particularly relevant for investors in risk assets (such as Bitcoin).
We must remember that we are in times of volatility and uncertainty. Consequently, investors generally become more conservative. Risk appetite decreases. This, in practice, usually means that investors seek safe haven in cash and bonds. In this way, the stability and predictability of the portfolio is increased. It is no accident that Goldman Sachs strategist Kamakshya Trivedi forecasts a stronger dollar for the coming quarters.
Now, we know that cash and bonds are not the best long-term solution in an inflationary environment. This is (obviously) a short-term solution. In the short term, the measure works. Because the vast majority prefer to lose a little with the dollar than to lose a lot in risky assets. Of course, sooner or later, you have to invest in something that rises with inflation. Many investors are beginning to see a choice in commodities and companies (defensive and value) for opportunities and diversification. However, it is not easy to make a selection in these times of so much uncertainty.
Some analysts at Goldman Sachs have talked about the odds of a “soft landing”. That scenario is still possible. And the labor market data is certainly suggesting this possibility. Of course, this scenario, over time, has lost a lot of strength. Why? Good because everything will depend on inflation and monetary policy. If inflation refuses to subside and the Federal Reserve is forced to raise rates much higher than anticipated, the labor market will surely feel the pinch.
In documents from 2020, Goldman has said that cryptocurrencies like Bitcoin are not an asset class. (asset class), because they do not generate cash flow like bonds and do not generate income related to global growth. Additionally, they are a poor hedge against inflation. These comments have the ability to boil the blood of the most fanatical bitcoiners. However, the “offensive” does not remove the truth. Notably Goldman Sachs offers to include cryptocurrencies in investment portfolios for its high-profile clients.
Bitcoin is a code. And that code works like a speculative asset. The code represents an interchange fee. That exchange rate fluctuates with supply and demand. So many look to buy low and sell high to make a profit. The risk (of losing) and the opportunity (of winning) is directly related to its volatility. Whether we like it or not, Bitcoin, at this stage in its brief history, behaves like a risky asset. Its correlation with the S&P 500, Nasdaq and Big Tech is clear and evident.
Other analysts within Goldman Sachs are putting the matter in other words. Zach Pandl has said that Bitcoin will compete with gold as a “store of value.” However, it must be recognized that at this time this is a hypothetical scenario. It is important to differentiate aspiration from reality. A risk asset, despite its great potential, can hardly be considered a “store of value” due to volatility. Stability (short and long term) is one of the most important characteristics for a store of value.
Ultimately, the war of terms is a psychological matter.. The word “risk”, due to its negative connotation, is constantly misunderstood by the most sensitive of orthodoxy. And, at the same time, concepts such as “store of value” and “safe haven”, due to their positive connotation, are very easily accepted. However, we cannot cover the sun with a finger. Abusing language is not the most sensible solution. Changing reality with language is the solution of the fanatics. Nevertheless, a serious investor calls things by their name. Aspirations are aspirations. And reality is reality.
Goldman Sachs is a very large organization. Not all departments think the same. Not all analysts think the same. And not all opinions remain the same over time. Things change. And perspectives evolve. There is nothing more imprecise than the accuracy of a forecast. Much of what is said is subjective. Y yesterday’s opinions are not necessarily the same as tomorrow’s opinions. Only fools don’t change their minds.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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