For the world’s most successful bank, Goldman Sachs sure seems to be having trouble deciding where the economy is going. In a series of reports, as well as statements by CEO and part-time DJ David Solomon, the quintessential Wall Street bank has been calling a recession, then backing down, then calling it again. It’s a delicate balancing act for Solomon, who has seen how the Trump Administration can focus unwanted scrutiny on law firms and universities. He wants to keep his company safe.
It’s causing whiplash among Wall Street watchers, who often take Goldman’s pronouncements to the bank.
On March 30, Goldman issued the latest in a string of ever darker economic forecasts. Worried that Trump’s tariffs would swamp the economy, it predicted a 35% chance of the U.S. economy falling into recession. “The upgrade from our previous 20% estimate (of a U.S. recession) reflects our lower growth baseline, the sharp recent deterioration in household and business confidence, and statements from White House officials indicating greater willingness to tolerate near-term economic weakness in pursuit of their policies,” Goldman said in a research note.
On April 7, as the full weight of Trump’s proposed tariffs hit, Goldman’s economists raised their forecast again, from 35% to a 45% likelihood.
On April 9, they forecast a GDP loss of 1% this year and a 65% probability of the economy “entering a recession in the next twelve months.”
But an hour later and following Trump’s 90-day tariff pause, Goldman economists said a recession is no longer their base case: “We are reverting to our previous non-recession baseline forecast with GDP growth of 0.5% and a 45% probability of recession,” a group of researchers led by Jan Hatzius wrote in a report.
Then on April 14, announcing the firm’s strong first-quarter earnings, Solomon said there’s a strong chance of recession, but he wouldn’t put a number on it. “The prospect of a recession has increased with growing indications that economic activity is slowing down around the world,” he said.
Still, there’s one word that hasn’t yet been uttered by Solomon: “tariffs.” As the New York Times’ Rob Copeland reported, “in a deft feat of linguistics, [Goldman] executives managed not to utter the word ‘tariff’ once,” on an hourlong call with analysts about Monday’s earnings. Solomon “unfurled a bouquet of euphemisms,” the Times reported. Speaking of “landscape changes,” “uncertainty about how certain things that are close will proceed forward,” and a change in “constructs” that affect how international businesses “interact to the U.S. and global economic system.”
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Trumplandia
- About those Tariffs: GM’s Chevy Trax—a $20,000-ish entry-level mini-SUV that the Detroit carmaker builds in South Korea—would be “killed” by Trump’s new 25% tariffs on imported cars, a devastating blow to GM, the Wall Street Journal reported. Meanwhile, U.S. aluminum giant Alcoa says the tariffs are going to cost it $100 million this year. The company ridiculed tariffs’ effectiveness, noting that as the U.S. imports more than 4 million metric tons of aluminum annually (most of it from Canada), the U.S. would have to build at least five new smelters to close its trade deficit for the metal. That would likely take up to a decade, cost billions of dollars, and require additional energy production equivalent to that of seven nuclear reactors, CEO William Oplinger said. “Until additional smelting capacity is built in the U.S., the most efficient aluminum supply chain is Canadian aluminum flowing into the U.S.,” he said, adding that Alcoa won’t build new capacity on the basis of tariffs. Oplinger’s comments came as the company announced first-quarter profits of $548 million, compared with a loss of $252 million a year earlier. Revenue rose 30% to $3.37 billion but missed the $3.42 billion that analysts modeled.
- Powell’s paradox: Fed chair Jerome Powell has a problem: His mandate is to ensure inflation goes down and employment goes up. The only real tool he has for accomplishing that is setting the so-called “discount rate,” the interest rate at which the Fed lends to banks, who in turn lend to consumers and businesses. Now, the TTT (Trump Tariff Turmoil) has put him in a bind. If the tariff tactics send inflation shooting up (which Powell said is “highly likely”), he’ll need to raise interest rates to get people to spend less. But that will lead to more people losing their jobs. If that happens, Powell said he’ll have to pick one: inflation or unemployment, and that, he said, would “no doubt be a very difficult judgment.” He added that “without price stability, we cannot achieve the long periods of strong labor market conditions that benefit all Americans.” That isn’t sitting well with Donald Trump, who wants Powell fired for failing to cut interest rates.
- Port problems: Remember Trump’s plan to get friendly U.S. financiers to buy two Panama Canal ports from China? Well, that deal’s hit another rock after last week’s report from Panama’s government auditor that the current port owner, Hong Kong-based CK Hutchison owed the Panamanian government $300 million. Now, a deal for Italian shipping magnate Gianluigi Aponte and U.S. asset manager BlackRock to buy the ports as part of a $22.8 billion package with dozens of shipping terminals around the world, could see the two Panama ports carved out and their transfer or sale delayed, according to the Wall Street Journal. “It’s going to be nine months of regulatory review. So we’ll see how this all plays out. I’m actually pretty optimistic that we’ll find a solution,” BlackRock CEO Larry Fink said.
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The Usual Suspects
- Meta’s mistakes? Meta chief Mark “Cage Fighter” Zuckerberg, put on a suit and tie and testified in a federal courthouse in Washington this week as the Federal Trade Commission seeks to break up Meta’s world of platforms, which may force the Facebook founder to spin off Instagram and WhatsApp. Zuckerberg said he bought Instagram and WhatsApp because he saw value in the companies—not to take out competitors, as the FTC alleges. In one telling document revealed at the trial, Zuckerberg pondered a 2018 move that could have forced the spinoff. “I wonder if we should consider the extreme step of spinning Instagram out as a separate company,” he wrote. “While most companies resist break-ups, the corporate history is that most companies actually perform better after they’ve been split up.”
- Overdraft craft: There’s even more money coming to the big banks this year, as Trump prepares to roll back the Consumer Financial Protection Bureau’s $5 limit on overdraft charges. Reversing the rule, which took effect in the last weeks of Joe Biden’s presidency, would restore a revenue stream of about $5 billion a year to the largest U.S. banks. It would have saved U.S. consumers the same amount, or about $225 for everyov household that pays overdraft fees. The fees “led to tens of millions of consumers losing access to banking services, as well as facing negative credit reporting that has prevented them from opening another account in the future,” the CFPB said in a statement in December. Trump’s signature is expected shortly. Meanwhile, the CFPB’s new chair, Project 2025 co-author Russell Vought, scored a win for the banks when a Texas court ruled the CFPB had overstepped its powers by limiting credit card late fees to $8. The CFPB switched sides under Vought and joined the suit to overturn its own rule.
- Chipped away: On Tuesday, Nvidia said it would take a $5.5 billion loss from TTT since Trump slapped more export controls on sales to China-related firms. Leaving it with masses of unsold chips and orders it can’t fill, its shares fell nearly 7%. Chipmaker AMD said Wednesday that the export controls would cost it $800 million, and its stock also sank more than 7%. The law of knock-on effect held true: ASML, the Dutch company that makes the machines that make the newest chips, fell more than 4% because orders for its equipment didn’t meet expectations. CEO Christophe Fouque said the Trump tariffs had “increased uncertainty.”
- That Hertz: That yellow-and-black car rentals company that usually has the highest prices (Hertz surprised me with the best price last weekend when I rented a car in Nashville) saw its shares rise 56% when Trump buddy and perpetual market commenter Bill Ackman said his Pershing Square Capital Management held 4.1% of the company. This could signal a possible bid to take over the company or, at least, influence its management. Hertz came back from Covid-era bankruptcy but lost its shirt betting on a fleet of Teslas that renters found too hard to use, which led to a $200 million write down as it unloaded the Musk-made EVs. Hertz may still be in trouble. As of the end of March, short-sellers held about 40% of Hertz shares, up 19% since February.
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Elon’s World
- The potential inheritance squabble: Elon Musk has had at least 14 children by four women, but an investigation by The Wall Street Journal suggests he may be using X to recruit yet more women to have his children via remote insemination.
- The X gamble: New financial disclosures show just how bad a bet X was for Musk and his co-investors. Revenue fell 66% in 2023 at X’s U.K. operations. Musk recently “sold” X to xAI, his artificial intelligence company, for a reported $32 billion, down $12 billion from his 2022 $44 billion purchase of the platform then known as Twitter. Last autumn, Fidelity wrote down the value of its stake in X by 79%, valuing the whole platform at only $9.4 billion.
The Short Stack
- Doesn’t ad up: Count advertisers—and the media and tech companies that rely on them—among the casualties of the TTT. With tariffs on and off and maybe on again, companies have no idea what their goods will sell for, or even what goods they’ll be selling next week. That means they’ve got no idea what to advertise. “You’re going to introduce uncertainty about how they make stuff, let alone what’s going to happen to consumers in terms of their propensity to buy,” Brian Wieser, an ad industry consultant, told the New York Times.
- Chasing check bouncers: JPMorgan Chase is suing more customers who they say embezzled tens of thousands of dollars each in the so-called “infinite money glitch” last year. The glitch credited customer accounts instantly for remotely deposited checks, even if they bounced a few days later. Some customers would write bad checks, deposit them in a Chase ATM, and immediately withdraw the full value of the check before it bounced. Videos began circulating in late August showing people celebrating the withdrawal of wads of cash from Chase ATMs shortly after bad checks were deposited. Global paper check fraud hit $26.6 billion in 2023, according to Nasdaq.
It’s a Great Time to Be a Bank
All that tariff turmoil. All that trading. All those profits! Your 401k may be going down, but the profits at top banks are going up. Goldman Sachs recorded even more gold arriving in ever more sacks, with a first quarter net profit of $4.74 billion, up 15% from the same period last year, even as revenue only grew by 6% to $15 billion. Equity trading revenue was a big piece of that, spiking 27% to $4.2 billion, driven by market volatility linked to the Trump tariff turmoil. However, investment banking did not do so well: Advisory revenue from mergers and acquisitions fell by 22% to $792 million, and investment banking fees fell 8% year-on-year. “Clients have become more cautious,” said CEO David Solomon. That hasn’t hurt Solomon personally. He took home $39 million last year and was awarded an $80 million bonus if he stays in place for five more years.
Citigroup said profits rose 21% to $4.1 billion even as revenue climbed only 3% to $21.6 billion. Shares rose 3% on the news, but they are still down 24% since Trump was sworn in. CEO Jane Fraser appeared to be whistling a happy tune when she said that “When all is said and done, and longstanding trade imbalances and other structural shifts are behind us, the U.S. will still be the world’s leading economy, and the dollar will remain the reserve currency.” Revenue from equity trading rose 23% to $1.5 billion, above the $1.4 billion estimate, as the bank said “increased market volatility” led to more trading.
At Bank of America profits climbed 11% to $7.4 billion as revenue rose 5.9% to $27.51 billion. A big contributor is what the bank calls net interest income (and what you might call a sucker punch): It’s the difference between that 0.01% interest they pay on the money in your checking account and the 8.5% return they get for lending that same money to the dry cleaner up the block. NII hit $14.6 billion in the quarter, above the StreetAccount estimate of $14.56 billion. “Consumers have shown resilience,” said CEO Brian Moynihan. PT Barnum might have put it differently. BofA shares are down 20% since Trump’s inauguration.
A few blocks east and north over at JPMorgan Chase, revenue rose 8% to $46 billion, beating expectations, and profits were up 9% year-over-year to $14.64 billion. All that turmoil, all those trades: Trading revenue jumped 48% to $3.8 billion. Shares were up 4% on the news, but are still down 12.7% since January 20. Still, storm clouds are gathering, as the cliche goes, and Chase CEO Jamie Dimon, once an ardent Trump fan, told The Financial Times in a rare interview that he’s nervous.
Dimon said the U.S. has remained “a haven” because of its prosperity, rule of law, and economic and military strength, but he said that economic position is threatened by Trump’s tariff turmoil. “A lot of this uncertainty is challenging that a little bit,” said Dimon. “So you’re going to be reading about this nonstop until hopefully these tariffs and trade wars settle down and go away so people can say, ‘I can rely on America.’ The markets are very volatile, it scares people.” And he urged Trump to start talking to China. “I don’t think there’s any engagement right now…it doesn’t have to wait a year. It could start tomorrow,” said Dimon.
Too Much Google
Google built an illegal monopoly in digital advertising, violating federal antitrust law, Judge Leonie Brinkema said on Thursday, slamming the internet giant for illegally tying its publisher ad server and its advertising marketplace. Brinkema said in a 115-page ruling that Google broke the law to build its control of the technology that places advertisements on pages across the web.
The Justice Department and a group of states had sued Google, arguing that its monopoly in ad technology let the company charge higher prices and take a bigger commission on each sale. “In addition to depriving rivals of the ability to compete, this exclusionary conduct substantially harmed Google’s publisher customers, the competitive process, and, ultimately, consumers of information on the open web,” wrote Judge Brinkema. The decision adds to Google’s woes and could endanger its business model.
In August, another federal judge ruled Google’s search function had developed an illegal monopoly. He begins hearings next week on breaking up the company and could force Google to sell its Chrome browser. Judge Brinkema will next have to rule on a Justice Department request to force Google to sell parts of its ad tech business that it has acquired over the years. The U.K. and the European Union have also ruled Google’s practices illegal monopolies and are weighing huge fines. Google shares were down 1.5% at midday Thursday, and they’ve fallen about 23% since Jan 20.
The cases were originally brought under the Trump Administration as part of an attack on Big Tech’s monopoly and were continued by the Biden Justice Department. However, court watchers say this isn’t about leveling the playing field—it’s about controlling which posts Big Tech takes down and how their search results are skewed, a cause dear to Trump’s heart. Peter Salib, a law professor at the University of Houston Law Center, told Yahoo Finance that Trump’s motivation for going after companies like Meta and Google is to curb censorship of conservative content.
Peter S. Green is a veteran reporter and editor who has spent more than two decades covering business and finance from Eastern Europe to New York City, and has worked for Bloomberg News, The New York Post, The New York Times and The Messenger. He lives in New York City and is always looking for the next big story.
