YouSaid · the spoken record

John Waldron

lines on the record: 50
first: 2020-04-01
most recent: 2020-04-01
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“In their markets are not unusual at all. If you look at the last four or five major bear markets, typically you do get rallies that average around 15% over around 40 days before falling back to previous lows. And if we look at the big bear markets in 2000 after the technology bubble burst, and in 2008-9 over the financial crisis, In both cases there were six rallies of 10% or more or thereabouts before the markets pulled back and made a final low. So I think just to make final comment, what's been unusual so far about this bear market is really the speed and the volatility, which reflects some technical factors and the unprecedented nature of the downturn. We do expect a big hits of profits and dividends.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Come down. So, I think there's still some downside risk evaluations before we get a market trough. Having said that, I do think it's important to emphasize in line with Jan's comments about the V shape, that is very much what we're looking for in the equity market as well. We're looking at profits or earnings per share to be rising over 50% next year from the trough levels that I described. And we would fully expect equity markets and other risk assets to anticipate the recovery in the economies which Jan talked about. One final point though about the rally that we've seen over the last week or so, many people have said that this sort of reflects a real turning in optimism and certainly we agree that some of the necessary conditions for a recovery are starting to be in place, in particular the policy support that I talked about. And that's true, I think, in Europe as well. Having said that,”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Are high, particularly in relation to such low bond yields and interest rates. But again, I think we should be somewhat cautious about the prospects for this year. Our US strategy team are expecting dividends in the US to decline by 38% over the next nine months. So on a four-year basis, dividends will be 25% below the level of 2019. And we see similar risks to dividends in Europe. The French government, for example, has argued that companies in which the government has stakes should not pay dividends, and the government will vote against them during AGMs, while Norway has required financials to stop paying dividends, and the German government has also talked about imposing restrictions on payouts. So bear in mind that 10 of the 50 Eurostocks companies do have government stakes, and we would expect dividends.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Many of the valuation metrics given the recent bounce inequities are not really looking at sort of stress or trough levels that we would typically see at a bear market low. Just to give you an example here in the European region, the forward PE based on consensus estimates, which we think are too optimistic, is currently around 12 times. That's the stock 600 companies. When you look back at the 2008 low or in 2011 around the sovereign debt crisis, that multiple came down to between six times and eight times. And this is a similar observation that we find across other markets as well. It is true, of course, that some valuation metrics are looking very attractive, in particular dividends.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Jan just describes are very large and larger really than the consensus and indeed I think the markets are now pricing. Just to give you some numbers on this, we're looking for S&P profit earnings per share to fall by 33% this year. The current bottom-up consensus is minus 1 across Europe, for example, we're looking at a fall of 45% in earnings per share. The current bottom-up consensus is minus 4. And we're looking at big falls across Asia as well. And actually the consensus there is still for some growth in earnings. Now, I don't think the markets themselves are reflecting those consensus estimates, but with the rally that we've seen, we don't think that they're fully reflecting the scale of the falls that we're expecting. And one way also to look at this is through valuation.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Now, John, in his remarks, said that we're not confident the equity markets have reached their lows. I think the rally that we've seen over the last week or so is part of that volatility and does reflect some very encouraging support that we've begun to see in policy terms, both monetary policy, which has gone a long way to really ring-fenced systemic risks in the financial system, which were becoming more volatile over the last week or two, but have now calmed down a lot. And secondly, the fiscal support, which is so important in the face of what's becoming a historical large decline in activity, given the number of countries that are in lockdown. But I want to emphasize that the corporate profit hit that we're expecting, given the size of the forces.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Again, this is something we haven't seen for a very long time. In fact, in the US since 1933. So just to emphasize the aggregate moves down has not been unusual in relation to bear markets around recessions. What has been really unusual is the speed and volatility.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“If you look at the almost difficult to recall now, but the US expi market was at an all-time high, just around five weeks ago. And the first declines of 20% that took it into what's typically thought of as bear market territory really took place in record time, just 16 trading days compared to 44, which was the last record set in 1929. Meanwhile, the volatility has been at record levels. We had just a week before last, three consecutive days of moves of bustle minus 9% or so. The first such series of 1929. And then last week, we saw, at least in the US, an 18% three-day rally, global equity is around 15%.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, thanks so much. Well, I thought I'd just reference mainly what the markets are doing and what we think is going to happen to corporate profits and the profile from here, given the comments that John and Jan have made. I think the first thing to say is that if we look at the decline in equity markets around the world prior to the rally in the last week or so, the moves have been generally speaking in line with the average moves that we've seen in bear markets over the last hundred years or so. So most equity markets fell from peak to trough or the most recent trough by about 30 or 35%. That's pretty much the average of what you tend to see in bear markets in history. What has really been remarkable about this bear market is two things. First of all, the speed and as John mentioned in his remarks, the volatility.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“More aggressive. And then I think in terms of the economic indicators, there's much more premium than normal on indicators that are one timely and don't incorporate a lot of assumptions by the statistical authorities. So the GDP numbers, for example, I think are not going to be particularly useful because they're quite lagged and they incorporate a lot of assumptions and they're probably going to understate the actual hit-to-output that we're seeing. Top of my list would be US jobless claims indicators every Thursday at 8.30. They are very, very timely. Five days after the week to which they refer and they don't incorporate any assumptions, they're just an administrative count. And they're probably the single most important economic data release for at least the next several weeks. Thank you.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Recovery. Second, really, the indicators of market functioning and stress, which John talked about maybe some I'd add to the list would be some of the non-US indicators that include, for example, cross-currency basis spreads, which have come in somewhat, but still remain wide despite the Fed swap lines and this repo facility that they rolled out this morning. And Italian sovereign spreads, I think, would be another one on my dashboard. Those remain significantly wider, and they've actually moved back out a little bit again in recent days after a period of improvement after the ECB.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Stronger growth, although I'd also caution that the read across is imperfect given how much more government control and industry focus that economy is relative to, for example, the US. I don't think it's going to be as quick in the US as in China, but China looks very, very quick indeed if you look at some of the industrial indicators in particular. Maybe lastly, what should we watch to see whether this forecast of a very sharp decline in Q2 followed by a pretty good recovery in Q3, Q4, plays out? I would say three types of information. First and foremost, of course, the medical information, very important, obviously not our area of expertise, but something that everybody's very focused on. The infection numbers need to come down and need to stay down in order to set the stage for”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“After the lockdowns and in our forecast that results in a gradual normalization of the level of GDP, if you take the US, for example, from 13% below normal in April to about 5% below normal in December, that's still well below normal, but it does mean that second half growth is going to be in that forecast quite strong on a sequential basis, really by any standard except the current one given the size of the drop previously. And we've got third and fourth quarter growth rates in the 10 to 20 percent annualized range across the major advanced economies. So in the US, for example, we're at 19%, quarter and quarter annualized in the third quarter. I would also say that looking again at China, That after a shock like this, you can come back with significant”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Now, what does it mean for the economic outlook? I would say it to us it suggests that while the near term outlook looks very negative, we have the most pessimistic Q2 forecast, I think, out there. I think the prospects that we'll see a pretty strong recovery starting around mid-year are pretty good. Now that assumes that the infection numbers start to slow sharply over the next month. I think that's consistent with the expectations of most experts and the experience that we've had in China, in Korea, and even hopefully to some degree Italy more recently. And our forecast assumes that people are going to gradually resume normal economic activity, cautiously, but nevertheless consistently.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“In additional funds that are going to be available in the Treasury's Exchange Stabilization Fund, which the Fed can to a large extent use to increase and increase these facilities and potentially introduce new ones. Now, how successful has it been? I think I would definitely say credit where creditors do. The Fed's been extremely aggressive and extremely quick. And relative to a couple weeks ago, a lot of the serious dislocations that had developed in the fixed income markets have diminished. And at least for now, the Fed is doing a great job managing to keep the system functional. And I have no doubt that they're going to continue to be on the front foot.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“The other thing that policymakers can do is really to protect the financial system from systemic damage. Otherwise, you'd get a different source of negative second round effect because solvent and creditworthy firms would be unable to fund themselves. So the Fed's rolled out a number of new facilities, which again, John went through, which I'm just mentioning here, the CP facilities, the money market facilities, the primary and secondary market, corporate bond facilities, and a restart of the term asset-backed securities lending facility, which is focused on asset-backed securities. And I think the important development in the fiscal legislation really was the funding of up to $454 billion.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“I think there's still a potential need to come back and do more, and that's one reason why we're expecting a phase four package of several hundred billion dollars that is probably going to be focused on some additional income support, including income support for states and municipalities.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Does a pretty good job in addressing these income hits? It's mostly, I think, focused on the right things with maybe half of the little over $2 trillion total going to income and cash flow support. And John went through these measures in some detail. I think the main question about the package is whether it's quite large enough. probably relative to the numbers I just talked about, the hole isn't being filled completely. Obviously, that's going to depend on just how large the hit to GDP is. And that's something that we're all learning about. So I think that's still a little bit TBD. But at least under our forecast,”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Trend in nominal GDP. So let's say the initial hit from the social distancing measures is $1.5 trillion. And that effectively means $1.5 trillion is now missing from income. If nothing is done, that $1.5 trillion income hit is going to deal another blow to spending through second round effects. And that's going to reduce output yet further. And that's, I think, that's why I see the fiscal policy package come in. And that's the most important part, maybe apart from the money for the Fed facilities that I'll get to. So how helpful is this package? I think the package...”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“And our trying to do, and I think we're doing a lot to address, is basically two things. One, and that's the job of Congress, is to try to effectively replace the income and cash flow hit that households and farms are taking from these distancing measures and the impact on output. Otherwise, if they didn't do that, there'd be a risk of a very significant second round effect. in the extreme more of a downward spiral and they're trying to stem that. So for example, we're estimating that just to put some numbers on this, we're estimating that the virus hit is going to reduce U.S. nominal GDP by a little over a trillion dollars in 2020 in absolute terms and by just under $2 trillion relative to the long-term”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Elevated for several more weeks, just look at, for example, the news yesterday that Macy's is furloughing most of its 125,000 workers. So we think that's probably going to bring the unemployment rate up to about 15%, which would easily be a post-war high. So that raises the question, of course, what can policymakers do to stem the downturn? And John already went through a number of those steps. I mean, just conceptually, I think the bad news is that they can't really do much to stop the near-term slide. I mean, the Q2 downturn is driven really by the need for physical distancing to stop the outbreak, at least until we have better medical options. So there's not really much that economic policymakers can do about that. What they can do”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“What's going on, and specifically, I would highlight claims for unemployment insurance, both in the US and some other countries. So if you take last week's number for the US initial jobless claims were 3.3 million, which is the biggest number on record by a factor of nearly five. And it's equal to 2.3% of the labor force. This week, we're likely to see an even bigger number, a lot of the unemployment claims offices have been backed up. So for this week, we're estimating a little over 5 million, which would be another three and a half percent of the workforce. That's basically 6% of the workforce in just two weeks. And ultimately, we think that the layoff”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Started to put a little bit of salve on the distress in particularly higher quality credit out in the marketplace, which I think has had a huge impact. And the other thing I would highlight would be the opening up of the discount windows for banks and for dealers and the coordinated drawing that the banking system has done together to kind of destigmatize that effect. I think it's had a good impact on stabilizing the system as well. So I highlight those two aspects. The Fed balance sheet is clearly going to grow meaningfully from here. It's north of $5 trillion and it's going to continue to get larger. And I think that'll be a fact of life for a while as they support markets before markets can kind of get up and running on their own.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“With kind of Fed backstop, if you will, allowing them to kind of maintain their liquidity metrics in a better place where they didn't need to put up gates and shut down the outflows, which was really kind of the equivalent of the breaktheck phenomenon we saw in 2008. I think the Federal Reserve was quick and adept in making sure that that didn't happen this time, and that had a huge impact on the functioning of those markets, which is really what allowed the CP market to start to heal itself, which is what allowed the investment grade market to start to open up. So that had a powerful combined impact. So the combination of the CP facilities coupled with their extension of quantitative easing, which was effectively the notion that the Fed and the Treasury's help would buy investment-grade paper and mortgages.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“I think undoubtedly it's what they did for the CP market in terms of putting together both a primary and secondary facility for commercial paper, which effectively allowed for the prime funds who are the traditional buyers of”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“With the U.S. government to see what kind of a role Goldman Sachs and the banking system can play in helping effect this as fast as humanly possible. And I think that's the big question, which I'm sure Janel has some views on in terms of the transmission mechanism into the economy.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Distressed industries, whether it's airlines, hotels, and other industries that are more kind of on the front lines of the early part of the distress, others more focused on getting money out into the economy levered through Fed capital. And I think that's still to be determined in terms of how it actually gets affected, but I think it'll be powerful. And then the direct payments to individuals, which is $250 billion, $1,200 per adult, $500 per child up to $75,000 of income. And then a significant expansion unemployment insurance of $250 billion plus aid to states and hospitals and other. So it's a pretty powerful overall package, which I think will be incredibly effective. I think the big question is how fast can they get it implemented? We're working very closely as much as we can with.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Executed through the SBA facilities. Some of that will be executed through the banking system. I think that is going to be a complex rubric of execution for the government, and I think it will take some time to get through. I think it will be an overwhelming application by small businesses to the system. I think we're a little concerned about how the system will absorb that. My guess is that's a place where if you're looking for more in the phase four package, that could be a place where they're going to have to come with more money for small business protection. The $500 billion that's really executed through what's called the Emergency Stabilization Fund or the ESF is really oriented for the Treasury to fund and for the Fed to execute backstopping money into more into the markets, into corporations. Some of it earmarked really for”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“In a crisis period here, not all of it perfect, of course, but I think you have to at least commend the speed. And in many cases, the size of the response. In the US, you look at the two plus trillion dollar bill that was passed on a twenty one or so trillion dollar economy. It's a big move. I think our observation, I'm sure Jan will address this as well. Our observation is it may end up being a down payment on what needs to be a bigger move in the context of the economic impact that this will have, but it's a big move. A large chunk of it hopefully spent in 2020, although some of that I think will spill into 2021, very targeted toward specific industries that are having more of an impact versus others, just to tick through the math, which many of you have seen, $380 billion towards small business.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Well, I would say that, first of all, I've been and we've been at Goldman Sachs very impressed with the speed, particularly of the monetary policy response. I think the good news about having been through the financial crisis is the monetary policy apparatus around the world had things on the shelf that were playbook elements of the playbook that were deployed in 2008 and 2009 where it took them a long time to develop in 2008 and 9. They were able to deploy that much quicker this time given that experience. And I think that's had an enormously important impact on financial markets and I think we'll have an important impact on the ultimate recovery. Fiscal policy obviously lags that for lots of good reasons including just the politics and various components of each country that has to respond. But again I observe a pretty favorable and quick response on the back of governments from a fiscal standpoint.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“John, that's great. That's helpful. Just shifting a little bit towards what you've seen with the regulators. And we know you've been spending a huge amount of time with the Fed and with others. It'd be great to get your perspectives on the stimulus bill that would just seem come out and how you think in practice it's going to be executed over the next few days and weeks.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“I think that the combination to me of the virus coupled with the China trade dynamic I think has really changed people's perspective. And so we see and hear a lot of incremental thinking and in many cases adjusting to try to diversify supply chains where possible. And I expect that to continue and accelerate. And I think increasingly One of the aspects that will emerge, I think, out of this crisis, which again, I think will be amplified by the virus as much as it was by the trade dynamics that we've seen maybe U.S.-led is the element of national security and whether supply chains become a bit more, I don't want to say nationalized as a matter of policy, but a bit more embedded in things that are more national security oriented and there's more pressure from governments to be more thoughtful about that as it relates to”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Well, I would say two things here really. One is I think the combination of the China trade dynamic that we've been through the last, call it eighteen or so months and the COVID crisis I think has really put a clear spotlight for most of the companies and clients that I speak with directly on the excessive concentration in many of their supply chains, whether it's China specific or otherwise in the name of efficiency and cost and outsourcing have become a bit more concentrated, a bit less focused on maybe the United States or markets where you feel a little bit more measure of control and a little bit more of an ability to create flexibility.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Want to shift gears a little bit. I know you spend a lot of your time talking to management teams around the world. And one of the topics that has come up a lot is how supply chains might shift as a result of what's happened with COVID nineteen. So what would be your overall observation on that based on the conversations that you've had with CEOs in the past couple of months?”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Slight bit more confidence that the economic recovery could be sooner rather than later. I think you'll start to see a pickup at M&A as people start looking at asset prices as more attractive than where they obviously saw them a month or two ago.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Helpful in the context of the potential buying power that's on the sidelines right now. IPO market, obviously this is not the time for IPOs. Those are riskier asset classes. I think we will likely see as the markets repair themselves the opportunity for companies to start coming public. Again, we will likely see some more equity issuance ahead of us, but that'll be a market that'll come back slower. And I think on the M&A side, we're actually encouraged by the amount of dialogue we see in the M&A environment, not as much deal activity, obviously, given the volatility, but we're encouraged by the amount of activity we see in terms of conversations, people drawing up lists of companies and assets that they're interested in looking at as things settle down a little bit. And so I think if we were to get some more normalcy in the markets and a”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“To no government intervention. And so that's an area that I think is going to get a lot of focus both in terms of regular way high yield and leverage markets but also small business markets where there's lots of lending that's been directly injected into companies that are smaller and have more leverage on them and are more exposed to economic shock. And so I think that's an area that we'll continue to be concerned about. Last comment I'd make on the equity markets is gross exposures have come down an enormous amount. So whether it's exposure in the institutional market with hedge funds, asset managers, insurance companies, pension funds, et cetera, those exposures are well off, but also retail exposure is heavily reduced. So household exposure way, way down directly and through mutual fund ownership. And so I think you've seen people take a lot of risk off, which is probably”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“It's been a good recovery, but I think if you look at your screen and you see the NASDAQ down twelve percent or thirteen percent and the SP down nineteen percent or twenty percent on the back of what we're seeing from a real economy standpoint, it feels like a pretty quick recovery. Yam will go through his forecast in a minute here. And it's obviously pretty dramatic in terms of what could happen near term. And so I think we're a little cautious on the equity market here given the quickness of the recovery. I think it has some technical aspects to it. In terms of other markets, I think leveraged lending and leveraged markets is a place to be focused on. I think the concern we would have is the level of defaults that could be ahead of us in the context of real economy demand shock data that will come in the coming weeks and months ahead. So worried about that. That's a marketplace that has less”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“I think what you're seeing right now in equities is a little bit of a rally on the back of obviously significant drop in asset prices, but also some technical buying power in the context of pension fund rebalancing, which typically happens at the end of every month. So we're now at the end of the month of March, obviously, and they're in asset managers and hedge funds, there are positive perspectives around the amount of rebalance activity that will come into the market from pension funds. And there's some buying ahead of that flow. So we're cautious about what we see in equities right now, and I'm sure Jan and Peter will have a comment on this.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“The concessions are really negligible. When you get into lower rated product, we're still seeing fairly healthy concessions. But importantly, secondary trading levels after the new issue has been absorbed have been pretty strong, which is what you'd like to see. So I would say the market is really in the investment grade side, starting to repair itself pretty quickly. You know, you mentioned equities, Matt. I would say on equities, the outflows from equities were pretty significant last week was a $26 billion outflow week, the largest since December of 2018, which is really the last time we had a significant hiccup in the markets. I think the S&P volatility has been kind of eye-popping for people. We saw both the biggest one-day drop since 1987 at down 12% and the biggest one-day surge since 2008 at plus 9.4%. So it's a tremendous amount of volatile.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Getting back to reasonable pricing, lower rated product still struggling. And so just to give you some dimension on that, investment grade market two weeks ago when we kind of started trying to get some new issuance priced, the new issue concessions for high quality product kind of single A rated, double A rated would have been 60 to 75 basis points of new issue concession Today, that's sort of zero to 20 basis points. So we've seen a pretty material change in new issue concessions. And in some cases, the”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“It's still very effective, which I think a number of us were quite concerned about when this began a few weeks ago. And so that's an important thing to keep in mind and to take stock of and to feel good about. The second thing I would say is the real stress points were in the short-term money markets and in the credit markets. I highlighted the CP market and the investment grade markets are starting to heal themselves. That still has a quality bias. So in CP A1P1 rated issuers are getting some duration and getting back to reasonable pricing, but A2P2 still shorter duration, wider pricing than would have been the case in more normalized markets. So we're still seeing a quality bias even in the shortest term money markets despite the Fed's intervention. And then when you get into term credit, investment grade and below investment grade, similar phenomenon where higher rated product, not surprising,”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Sure. Well, I would highlight at the outset a couple things, one of which is if you had asked any of us, could we run the financial market system with 95 plus percent of our people at the major banks, the major stock exchanges, the major other counterparties in the system working from home, we probably would have all had a fair bit of skepticism about that. I think one of the things that will be a bright light around what's an otherwise fairly dark period for us is the fact that the markets are functioning really well and things are working, generally speaking, at a pretty high level in what's obviously a very stressful period with a bunch of people working from home where the technology knock on wood is functioning very, very effectively. You may not like what you see on your screen in terms of asset prices, but the actual functioning of markets and the provision of liquidity is”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Our clients in the markets. As you mentioned, better tone this week. What's your clients watch for as the markets heal in the coming weeks? You talked about commercial paper, which has been a huge focus. Investment grade, high yield. Touch on equity and IPOs and how that would normally kind of heal itself and come back over time.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Have been coming into last week where they were really not functioning very well at all. And as a measure of the healing process in the financial markets, particularly in term credit, we've now seen an investment grade issuance $110 billion of issuance last week, $36 billion of issuance on Monday, and likely another $10 or so billion dollars today and $250 billion in the last month, all effectively record levels. The term credit markets are starting to heal themselves, which is going to be an important indicator of getting credit flowing back into the economy. And I think the banking sector will be an important transmission mechanism in affecting that.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Working closely together in a coordinated fashion to support the system, you may have seen that last week we agreed to suspend our share buyback as an industry. And we also announced a coordinated discount window draw from the Federal Reserve as an industry. Both measures are showing real support and coordination as an industry for the system. Our focus in the last couple weeks has really been on the shorter term money markets. We've been working closely together as an industry and with our regulators in working to get policy implemented to improve the CP markets and ultimately the term credit markets. I'll make some comments, I guess, later about this. But we've seen meaningful improvement in the CP market, certainly not functioning exactly as normal nor the way we all want them to, but they're materially better this week than they were.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Leverage ratios that would suggest a $250 billion incremental excess capital capacity on leverage requirements across the industry. So when you look at the largest US banks, the total loss absorbency has doubled really over the period from twenty eight till today. And so I think you're looking at a banking industry that is exceptionally well capitalized to deal with the stresses that we have in front of us as an economy. I would also say that we're keenly aware of our role as a system and as a banking industry to being an important part of the engine to get the economy back up and running as we get hopefully over the apex of the coronavirus crisis so we can get kind of back into thinking about how to get the economy back up and running. We're going to play as an industry a very important role. And one of the things that we feel good about at Goldman Sachs is that we've been alongside our brethren in the industry.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Both in the United States and globally on the back of the financial crisis. And so if you look at the capitalization level today and the ability to absorb losses today, the industry is extremely well capitalized right now. Just to give you some dimensions to that, we've increased as an industry our tier one capital, which is a key kind of regulatory metric by which we're all evaluated on a global basis by over seventy five percent since the pre-crisis levels. So if you measure back to like the second quarter of twenty eight, which would have been right around the beginning of the financial crisis, that tier one capital for US banks would have been about a trillion dollars in the fourth quarter of 19. So let's just say before the advent of the coronavirus in the US, that tier one capital would have been north of a trillion seven. So a pretty substantial increase in tier one capital just for the U.S. banks alone.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“Appreciate the question. I guess I'd say a couple things at the outset. First, we feel very good about the overall health of the banking system. I would observe this crisis we're living in now has really began as more of a real economy crisis, almost a corporate crisis, large and small businesses alike, Main Street crisis more than the last time around, which was really kind of a banking crisis that bled into the real economy. This is really more of a demand shock and the real economy, and it's the banking system that I think is going to be used as a transmission mechanism to help heal the economy. And fortunately, we came into this period with a much healthier banking system than we did last time around. There was lots of incremental regulation and liquidity buffers added to the banking system.”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT
“So, John, why don't we kick it off with a question we've gotten from a lot of clients, which is the health of the global banking system. It feels very different this time versus in 2008. What are your observations on that? What indicators do you look for with respect to health of the system? And how should our clients think about this?”
2020-04-01 · Goldman Sachs Exchanges · Client Call: Market Volatility and Potential Economic Impacts · IDENTIFIED FROM THE TRANSCRIPT