Goldman CEO David Solomon says there’s a good chance of a recession and so it’s time to be cautious

Goldman Sachs CEO David Solomon warned Tuesday that the U.S. economy might be headed for a downturn that could make investing and business decisions more difficult.

“I think it’s a time to be cautious, and I think that if you’re running a risk-based business, it’s a time to think more cautiously about your risk box, your risk appetite,” Solomon said during a live interview on CNBC’s “Squawk Box.”

“I think you have to expect that there’s more volatility on the horizon now. That doesn’t mean for sure that we have a really difficult economic scenario. But on the distribution of outcomes, there’s a good chance that we have a recession in the United States,” he added.

Solomon spoke just minutes after Goldman released third-quarter earnings results that topped analyst expectations for both profit and revenue. That comes at an important time for the company as it prepares another reorganization, this time combining the Wall Street giant’s four main businesses into three.

Reorganizing the company and streamlining the businesses reflects “the evolution of this one-Goldman Sachs ethos” that he said will help the bank serve clients better.

“The fundamentals really don’t change,” Solomon said. “The leadership does move to different places, but it’s the same leadership.”

Speaking on macro issues, Solomon repeatedly stressed the importance of caution, noting the tightening of financial conditions and rise of inflation in recent months.

The Federal Reserve has been raising interest rates aggressively since March in an effort to calm inflation running at its highest levels in more than 40 years. Markets have reacted strongly, with stocks tumbling and Treasury yields surging.

“That environment heading into 2023 is one that you’ve got to be cautious and prepared for,” Solomon said.

His remarks came just a few days after his counterpart at JPMorgan Chase, Jamie Dimon, also warned of looming trouble for the U.S. economy, saying higher inflation and interest rates and the war in Ukraine threaten an economy that otherwise is doing well now.

Like Dimon, Solomon said investors need to be conscious of the challenges ahead.

“In an environment where inflation is more embedded and growth is slower, you know, asset appreciation will be tougher,” he said. “Are we going to get rooted in that kind of a decadelong scenario? I don’t know.”

He said public policy in areas including energy and immigration will be important in determining how well the U.S. is able to navigate through its challenges.

“Can we find ways to do things that allow us to invest in our society in a way that makes it easier to shift this? I don’t have the answers to that, but I’m certainly going to focus on it,” Solomon said. “If you’re a risk manager right now, I think you have to prepare for a more difficult environment in 2023.”