Goldman Sachs Webinbar – 8 April 2020

So here we are in the middle of the Coronavirus/Covid-19 pandemic. Brexit is almost a long forgotten topic and many folk are working from home, where they are fortunate enough to be able.

There are lots of important issues being addressed all over the world. I am aware of all of these and am not avoiding the subject of any of the suffering that is ongoing. This blog is not meant to cover all of those important topics. Its purpose is simply to provide a partial insight into an interesting webinar that I was invited to attend following my participation in the Goldman Sachs 10,000 Small Businesses UK (GS10k sb uk) programme last year. These are just a few notes that I made following and during the business and economic focused webinar.

It was all very high level, macro economic content The key points from the webinar, for information only, are as follows below. Please note that these are only the opinions of two people, albeit very knowledgeable ones, and a few added notes and comments from me in brackets. Don’t base your planning around it!:

First we heard from the Chief Executive of Goldman Sachs international, Richard Gnodde.

  • He discussed the support for alumni of the GS10k sb uk community which I must say is excellent. I am regularly in touch with members of my particular cohort.
  • He fed back the results from the recent Alumni survey to the UK government. He has regular calls with them at present. Results include:
    • 97% of businesses negatively impacted
    • The duration of the pandemic is key to the impact.
    • 65% support the government message (I would have thought/hoped more)
  • He has met with the treasury on video call, including the chancellor, where the SME sector has been talked of as of key importance and government are searching for more ideas to assist the sector. (They realise it is the engine room of the UK economy).
  • We have a big valley to cross but it will be crossed. His advice? – Chase liquidity. Preserve cash.
  • Borrow where you can – cash is cheap and can always be paid back before you spend it.
  • Be creative in your connection with customers (and colleagues)
  • Equity and bond markets are functioning well and there is a lot of volume flowing through. Gradually finance is filtering down
  • The prize on the other side of the fight will be good. We will have very strong tailwinds and whilst the journey will be tough, it will be rewarding. (Just look at how we have all made changes to our businesses already).

Richard signed off and then we heard from a colleague of his, Peter Oppenheimer, Goldman Sachs head of macro research in Europe. He spoke about his thoughts as to how the bank felt things may play out. All of course caveated by the fact that these are unprecedented times. Having said that he made some excellent points that do give hope from a business perspective. If we all plan with hope in mind we can maintain positivity.

My notes from Peters talk included:

  • This is an economic shock and needs to be put in perspective. There will be a solution.
  • Let’s not forget that:
    • only 6 weeks ago stock markets were at an all-time high
    • we had the longest expansion without recession for over 100 years.
    • Interest rates were at record lows.
    • Inflation was low
    • There was not a lot of business debt.
    • There was a general feeling that this growth would continue.
    • Therefore there is no reason why it should not return to that point.
  • Having said that this is an historic shock. 90% of the global economy is subject to temporary lock down. One third of all humans.

We should expect a strong recovery due to this being completely different to the financial crisis a decade ago. Those long made problems and “bubbles” have predominantly all gone and been dealt with. There was a lot of private sector balance sheet debt at that time. All of which needed restructuring. That took a long time to do and to repair. There were not many policy tools that could be used at that time – not like now!

Today activity has been stopped by force and is likely to start almost as quickly when it restarts hence a rebound is expected. (We return to where we were 5 weeks ago).

In the financial crisis the only thing the governments and central banks could do was print money and lower interest rates. Here we are seeing the money pumped into the businesses rather than just into the banks and general quantitative easing. Finance for businesses is also now a lot cheaper and more accessible than it was during the last crisis.

We have seen a very rapid response via fiscal policy to ease the effect of this sudden stop in activity. Never seen before. The UK government has been very aggressive. This included direct fiscal spending such as the wages guarantee scheme, deferred tax and VAT and so on. None of this can prevent a downturn because it is a forced lock down, but when normalisation of activity and mobility come back in, they are very positive stimuli that are in place/have been used.

The main uncertainty is the exit strategy from lock down. There are encouraging signs across Europe starting to be seen. The example given was Wuhan Providence already being open for business and travel in and out.

The worst recessions tend to be associated with big things like the bursting of financial systems such as banking. For example the US housing market and the banking system leading onto the worldwide recession in the late noughties. These see longer slower declines and far slower recoveries.

With a shock/event-driven recession, when something comes out of the blue such as a global conflict; spikes in oil prices; or in this case a virus, the difference tends to be that whilst on one hand you get very big falls in financial markets and economies occurring very quickly, on the other hand the recovery is often swifter too. Historically when this happens it is over a shorter period of time with a quicker recovery.

This is an event driven problem not a cyclical recession. It all looks very bleak and unprecedented but all the signs point to a far quicker recovery than the banking crisis.

There is no reason why, when things return more towards normality, that we should not all find ourselves back in that same position outlined above – an economy that is growing steadily and soundly. In addition we will have all of the positives about people doing things a different way, using technology, and so on and so forth. (END)

This was a great webinar to attend. Who knows if they will be right. What they said made sense and resonated positively. Hence the share.

Thank you for the webinar.

Richard Gnodde –

Peter Oppenheimer –

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