Goldman's Solomon on Iran, AI and Private Credit
Speakers
Summary
- Markets are currently pricing in a "benign" outcome regarding Middle East conflicts, specifically betting that energy supply chains will remain intact despite geopolitical uncertainty.
- Solomon identifies a "technology supercycle" in AI, noting massive capital deployment that will drive enterprise productivity, though he acknowledges there will be capital destruction alongside winners.
- A specific warning is issued regarding Private Credit: after a long period without a recession, lending standards have deteriorated ("frothiness"), and a mismatch exists where retail investors expect liquidity from fundamentally illiquid assets.
- Goldman Sachs remains bullish on the US-China bilateral relationship and notes that Chinese markets have outperformed over the last 12 months, driving capital flows back into the region.
Trade Ideas
Solomon notes markets are "benign" regarding the Middle East because participants believe "energy supply chains" won't be affected, but he admits he expected "a little bit more volatility" given the uncertainty. The market is priced for perfection (no supply disruption). If the conflict escalates to impact supply chains (the risk Solomon highlights), risk premia will re-rate rapidly. Long energy is the hedge against this complacency. LONG as a hedge against geopolitical complacency. The conflict de-escalates or remains contained, causing oil risk premiums to erode further.
AI is a "technology supercycle" that will drive "massive productivity gains." He states, "There's a lot of capital being deployed to grow AI capabilities around the world." While he mentions there will be losers, the massive capital deployment phase benefits the infrastructure providers (chips) and the platforms integrating the tech (productivity software). The "glass half full" view suggests the spending cycle is not over. LONG the "picks and shovels" of the capital deployment phase. Over-investment leads to capital destruction in the short term if returns on AI don't materialize quickly.
"Chinese markets have done very well in the last 12 months. That's increased capital flows into the region." He also notes an upcoming meeting between President Trump and President Xi in April. Solomon confirms the momentum trade in China is active and capital is returning. The upcoming diplomatic engagement provides a potential catalyst for further stability or clarity, supporting the ongoing rally. LONG based on confirmed capital inflows and price momentum. The Trump-Xi meeting results in increased trade friction or tariffs; the "fragile" relationship deteriorates.
In Private Credit, "lending standards deteriorate," "due diligence standards deteriorate," and there is "frothiness." He specifically flags "retail investors wanting liquidity from what are fundamentally illiquid products." The sector is vulnerable to a liquidity mismatch. If the economy slows, the combination of loose lending standards and retail investors rushing for the exits (in liquid wrappers holding illiquid assets) creates a systemic squeeze for BDCs and Private Credit ETFs. AVOID retail-accessible private credit vehicles due to liquidity mismatch risks. The economy continues "chugging along" without recession, keeping default rates low and yields attractive.
Up Next
This Bloomberg Markets video, published March 05, 2026, features David Solomon discussing USO, XLE, NVDA, MSFT, FXI, KWEB, BIZD, PSP. 4 trade ideas extracted by AI with direction and confidence scoring.
Speakers: David Solomon · Tickers: USO, XLE, NVDA, MSFT, FXI, KWEB, BIZD, PSP