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Goldman Sachs CEO Blankfein warns on risks for U.S. economy

by | 15 Feb, 2018

Blankfein thinks Trump is behind the drive forward in the stock market, but his policies also present a lot of risks for the future

Ok, yes we did had a correction in the equity markets last week, but the overall fundamentals are strong, the economy is looking robust with a tight labour market, stocks are making a recovery and we have little to worry about, right? Maybe not, says Goldman Sachs CEO Lloyd Blankfein.

Citing the proposed $200 billion infrastructure package from Trump, as well as $300 billion in additional spending elsewhere, Blankfein said in an interview with CNN: “The odds of a bad outcome have gone up.” He added: “Don’t forget, all of these deficits have to be paid for.”

Indeed, the U.S. budget deficit (how much more the government spends than it receives in revenues annually) grew to $666 billion in Trump’s first year. Given his new budget proposal (PDF) sent to congress on Monday, that could rise far higher.

It’s not only this however that worries Blankfein, but the wider economic conditions present in the markets. He said: “I’d be planning for the contingency that this turns out to be a worse time than people are thinking. With the Fed raising rates, with the withdrawal of quantitative easing, with the budget deficit widening out, I wouldn’t say this is the time I would max out on my risk.”

In the same interview he added: “If the president didn’t win, and Hillary Clinton won … I bet you the economy is higher today than it otherwise would be.” These are strong words from a former Clinton endorser, who later went on to dismiss Trump’s rhetoric on trade as just words and not actions, thus less damaging so far than the pundits make it out to be.

Despite the risks he outlined, it’s as great an endorsement from Blankfein as the President can hope for, and despite differences in opinion over U.S. policy, Trump is closer to Goldman Sachs than most know, given 2 of his most senior officials spent a large chunk of their careers at the investment firm – Gary Cohn and Steven Mnuchin.

Related: Gold in bull market as Dollar weakness drives interest higher

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:
Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.
Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.
Brokerage services are provided by the following:
US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth LLC, a regulated member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. For more information, including disclaimers, risk and transaction fees click here.
India account traded securities are provided by SIC Stocks & Services PVT Ltd. SIC does not make any personal recommendations to buy, sell or otherwise deal in investments. Investors make their own investment decisions. The services and securities provided by SIC may not be suitable for all customers and, if you have any doubts, you should seek advice from an independent financial adviser. For more information and disclaimers, click here.

 

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