Key insights
- Goldman Sachs anticipates increased M&A activity driven by monetary easing, fiscal stimulus, AI investment, and a more balanced regulatory environment. Solomon highlights a more confident approach from CEOs and boards. A U.S.-China reset is also deemed crucial. However, a protracted war with Iran or other exogenous events could negatively impact sentiment. Overall, the outlook suggests a moderately positive environment for US equities.
March 20 (Reuters) - Goldman Sachs expects mergers and acquisitions activity to be on the upswing this year despite the disruption caused by the U.S.-Israeli war on Iran, CEO David Solomon said on Friday.
"While it is difficult to predict the broader economic effects of the military action by the U.S. and Israel against Iran, we still see the potential for a more constructive operating environment," Solomon said in the annual shareholder letter.
The Wall Street giant said it expects monetary easing, fiscal stimulus in developed economies, capital investment in artificial intelligence technologies and a more balanced regulatory regime in the U.S. to drive M&A activity this year.
Top dealmakers have said that faster deal closings under the Trump administration have assuaged worries that many investors and boardrooms had when there was greater scrutiny under the Biden administration.
Solomon said CEOs and boards are taking a much more front-footed approach as they feel more confident in executing strategic transactions.
"We expect this upswing to continue though a protracted war or another exogenous event could, of course, change the current sentiment," Solomon said.
'U.S.-CHINA RESET NEEDED'
Solomon also called for a long-term reset in the U.S.-China relationship. The world’s two biggest economies have been working towards easing tensions after a period of heated rhetoric.
U.S. President Donald Trump earlier this week delayed his highly anticipated trip to Beijing to meet with Chinese President Xi Jinping as the war with Iran drags on.
"Given how entwined they are, it is important that the U.S. and China reach a new modus vivendi, not just for the next 12 months, but rather for the next 10 to 20 years," Solomon said.
"We believe there is a roadmap for more meaningful dialogue. That said, it remains to be seen whether that dialogue will lead to a significant agreement."
(Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Sahal Muhammed)