Bank top executives voice more optimistic about ‘soft landing’ for US economy

Executives from some of Wall Street’s biggest banks said the US economy is holding up better than expected and sentiment is more upbeat than a few months ago.

Comments from top officials at Goldman Sachs, Bank of America and Wells Fargo reflect growing belief that the Federal Reserve could achieve a so-called “soft landing” for the US economy in its fight to contain inflation and avoid a recession .

“The consensus has shifted in the CEO community that we can handle this in the United States with a softer economic landing than would have been expected six months ago,” Goldman CEO David Solomon told an industry conference organized by Credit Suisse on Tuesday.

Solomon’s more positive view was echoed Tuesday by BofA chief Brian Moynihan, who said mid-market profit margins were holding up “better than they thought” and consumer spending, which accounts for about two-thirds of the US economy, remained strong.

“If you look at consumers, they continue to spend,” Moynihan said at BofA Securities’ financial services conference. “These consumers have money. They work, they spend money and they can borrow a lot of money.”

Michael Santomassimo, Wells Fargo’s chief financial officer, also said “data dumping is still very healthy.”

The comments mark a shift in tone from late last year when top US bank executives highlighted a resilient consumer but gave a cautious outlook for the global economy. Solomon said at the time that some of Goldman’s clients “sound extremely cautious.” But as we head into the current US earnings season, top US corporate executives are divided on the country’s chances of escaping a recession.

S&P Global’s Risk Appetite Index, which examines data from around 300 US institutional stock market investors, showed this week that investor risk appetite remained negative but levels of risk aversion had fallen to their lowest level since November.

In its fight against inflation, the Fed has raised its key interest rate from almost zero to a target range of between 4.5 percent and 4.75 percent in less than a year. This has fueled fears that the US economy could slide into recession in 2023 and unemployment will rise.

Recent data has shown a surprising level of resilience in the labor market in the second half of 2022 and into early this year, raising hopes that the central bank may be able to lower inflation and avoid a recession.

However, new data on Tuesday showed that the US CPI fell less than economists had expected, serving as a reminder of persistently high inflation in the US.

Despite his more optimistic tone, Solomon issued a caveat that inflation is “still sticky” and that “it’s still uncertain exactly what the path to curbing inflation will be.”

“I think we’re in an environment where we’re probably going to have rather sluggish, slower growth for a period of time until we get a lot of that to compensate,” Solomon said.