By Saeed Azhar and Lananh Nguyen
NEW YORK (Reuters) -The United States may tip into a recession next year, but it is possible that inflation can be tamed without causing too much economic pain, Goldman Sachs (NYSE:GS) Chief Executive Officer David Solomon told Reuters.
"There's a reasonable chance of a recession in the U.S., but it's not certain," Solomon said on Tuesday after the company released third-quarter earnings. "I could still see a scenario with a soft landing."
Solomon's comments echoed those of JPMorgan (NYSE:JPM) & Co CEO Jamie Dimon in expressing caution about the economic outlook. Their counterpart at Bank of America Corp (NYSE:BAC), Brian Moynihan, has been more optimistic, pointing to the healthy finances of consumers and businesses.
Fitch Ratings said on Tuesday the U.S. economy will face a recession starting the second-quarter of 2023, but robust U.S. consumer finances will help cushion its impact.
"Fitch expects the U.S. economy to enter genuine recession territory — albeit relatively mild by historical standards — in 2Q23."
"The projected recession is quite similar to that of 1990–1991, which followed similarly rapid Fed (Federal Reserve's) tightening in 1989–1990," said Olu Sonola, head of the rating agency's U.S. regional economics in a report.
Goldman's Solomon also talked about the challenges facing private equity buyers, saying deal activity in the buyout sector has slowed.
"Private equity activity gets reset at a time like this because values have to come down because financing costs have gone up," he said. "So there's been less private equity activity right now."
A steep fall in large private-equity buyouts contributed to the slowdown in global dealmaking, with third-quarter activity dropping 54% to $716.62 billion from $1.56 trillion in the same period last year, according to Dealogic data.
Goldman Sachs reported a smaller-than-expected 44% slump in third-quarter profit on Tuesday, while the Wall Street giant announced it will reorganize its business into three units and scale back ambitions for its consumer bank.