David Solomon, CEO of Goldman Sachs, said Thursday that he expects capital markets to recover soon. “I think what we’re going through at the moment is a reset of valuation expectations,” he said in an interview with CNBC’s Jim Cramer. “In the coming months, we’ll see a little reopening in the capital markets when people get used to this valuation adjustment.” During the early stages of the pandemic, low-interest rates enabled newly formed companies to thrive and witness their valuations rise rapidly. Still, this year, the market for initial public offerings collapsed. U.S.-listed companies raised $4.8 billion in proceeds during the first half of 2022 compared to $155 billion in 2021, according to EY and Dealogic.
Several factors contributed to the financial meltdown, including soaring inflation, increasing interest rates, Russia’s invasion of Ukraine, and Covid lockdowns, which led investors to shift from risky, high-growth investments to safer, defense stocks While those headwinds continue to persist, Solomon says the market is adjusting to its new reality. “There’s always a backlog of companies that need to go public,” he said. “We’re three quarters into a more difficult capital markets environment. History would tell you, three, four, five, six quarters, you get that readjustment.”