Goldman Sachs CEO says he expects capital markets to ‘reopen’ next year

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Goldman Sachs CEO David Solomon said on Thursday he expects capital markets to recover in the coming months.

“I think what we’re going through right now is a reset in valuation expectations,” he said in an interview with CNBC’s Jim Cramer. “In the coming months we will see a small reopening of capital markets as people get used to this valuation adjustment.”

While a low interest rate environment allowed newly created companies to thrive and see their valuations rise rapidly at the start of the pandemic, the market for initial public offerings nose dive this year. US-listed companies raised $4.8 billion in revenue in the first half of 2022, up from $155 billion in 2021, according to EY and Dealogic.

The main culprits are soaring inflation, Federal Reserve interest rate hikes, Russia’s invasion of Ukraine and Covid lockdowns which caused investors to avoid risky bets and strong growth and to turn to safer defense actions.

As these headwinds continue to persist, Solomon says the market is adjusting to its new reality.

“There is still a backlog of companies that need to go public,” he said. “We’re three quarters into a tougher capital markets environment. History would tell you, three, four, five, six quarters, you get that readjustment.”

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