Goldman Sachs International’s Co-CEOs on Europe’s Opportunity, AI, and Market Volatility

0:05Anthony Gutman:One of the most consequential trends this year has been the outperformance of global equities relative to the U.S. But amid the escalating conflict in the Middle East, can this trend continue? And what are the implications for dealmaking and IPOs? I'm Alison Nathan, and this is Goldman Sachs Exchanges.

0:26Anthony Gutman:I'm here in our London office with the two co-CEOs of Goldman Sachs International, Anthony Gutman and Kunal Shah. In addition to running Goldman Sachs International, Anthony is the global co-head of investment banking, and Kunal is the global co-head of the firm's fixed income, currency, and commodities business. Anthony, Kunal, welcome to the program.

0:45Kunal Shah:Thank you. Great to be here.

0:47Anthony Gutman:So just to start, it's obviously a pretty precarious moment as the war in the Middle East continues to unfold. You both oversee our business in the Middle East as part of your role leading the firm's efforts in EMEA. We're two weeks into this conflict. Kunal, what are your observations and how are you thinking about activities in the region more broadly? Salison, these are clearly unsettling times. If you think about the Middle East, it's been a big strategic focus for us. We've been present in those regions for several decades. We have teams across the likes of Abu Dhabi, Dubai, Tel Aviv, Riyadh, Doha, Kuwait.

1:26Anthony Gutman:So right now, look, we're very focused on the safety of our own people. In some of these countries, they've lived through similar moments, and our people are very resilient. They have the grit to try and get through this. In some of the other countries, these threats are fresh, and our people are adapting to these very tense, difficult realities. We're following the guidance of the local officials. We're doing everything possible as a firm to help support our people and their families. But of course, these are difficult times for everyone. We're there and trying to be there for our clients. They're going to have to adapt to some of these risks.

1:59Anthony Gutman:I think we all hope that this situation will find resolution in a peaceful way promptly. But if you think through the structural trends in the region, we think they will reemerge. The Middle East for us has been a huge opportunity, for example, in our markets business as many of our clients have established platforms in presence, for example, UAE. The region, there's huge capital allocators, very relevant for asset and wealth management business. And from a banking perspective, Zantia will know well, a lot of strategic opportunities there where we hope over time we'll continue to be able to help.

2:32Anthony Gutman:But of course, this is a time when we're really trying to be there and be present and show that commitment to our people, but also our clients. Kunal, let's turn to markets for a moment. Market trends to start the year were obviously very positive in equities and especially non-U.S. equities, certainly including European markets. But how much has the escalating conflict in the Middle East changed things or has it not? So these trends were really a continuation of what we saw in 2025. And it wasn't just European markets, Asian markets, broad emerging markets had seen huge inflows. And February was one of the largest months for inflows into the rest of the world equities prior to these intense situations emerging.

3:10Anthony Gutman:And you've seen quite quick reactions across asset markets. The U.S. has actually outperformed. It had a lot of dispersion and sector rotations in January and February. But actually, the U.S. dollar strengthened in a typical risk-off fashion. And you have seen significant retracement in, for example, European stocks, but coupled with the weakness in the euro. So that has eroded some of the outperformance you'd seen in stocks in this time zone. If you look at Asian markets, there was volatility. Some of that was just down to broad deleveraging when this oil price-induced shock hit. But you have seen some consolidation and some of these markets have come back.

3:47Anthony Gutman:If you look net at the performance, for example, of the KOSPI, the market in Korea, it's actually been very strong despite some of the recent wobbles. Markets like Japan have still outperformed year to date. I think the market at this point is a bit more discerning and it's trying to think through actually some of the winners, the losers, those that may be more directly impacted by the current conflict, or those that may actually reemerge as trends subsequent to this. I think our investors are very focused on this theme. When you think about Europe, part of the reason why it got hit is because there is a big energy dependency.

4:22Anthony Gutman:And there are clear flashbacks to a situation that wasn't that long ago back in 2022. So the European assets, I still think, are going to feel pressure until you can see some de-escalation on this. But I think some of the structural trends in Asia are different. And of course, people are trying to handicap what the range of energy price outcomes are. But to the extent we've seen the peak, if we have or if we now settle within a calmer range, I do think investors are still focused on diversifying their portfolios. And many still are extremely geared to the U.S. and will be looking for broader opportunities.

4:58Anthony Gutman:So some reversals, but we are seeing some of the trends still intact and we think might have further to go eventually. Anthony, you talk to the world's most important business leaders basically on a daily basis. How are they thinking about these developments and the global economic outlook?

5:13Kunal Shah:Look, the first thing I would do is I'd echo what Kunal said, which is we came into this year with a very benign economic outlook. In fact, we came in with a pretty strong economic outlook. And in many ways, that economic outlook is still the context through which I think business leaders are looking at things. And I think while they are very mindful of the dynamics playing out in the Middle East and the risks of that, they're also not going to make short-term decisions as they reflect on how they run their businesses on a long-term basis. And so overall, the sentiment, I think, continues to be pretty positive in an economic perspective.

5:48Kunal Shah:People are looking forward. I think they're deploying capital consistent with that view. And as you know from speaking to our Jan and the Economist team and others, again, we're looking at economic growth in the US if all things continue the way they are, 2.5%, 3 % plus. And even in Europe, I'm sure we'll talk about it, there's a reasonable sense of momentum that's come out of the German fiscal stimulus and other things we're seeing. And so, look, as long as we have a broadly positive growth outlook for the economy, coupled with the technological revolution that we're seeing through AI, which is also a stimulus, I think, for positive CEO sentiment generally, and broadly strong balance sheets, which is not spoken about a lot.

6:28Kunal Shah:But if you look at balance sheets across corporates, across banks, across consumers, we're in a good state there. That's a setup for CEOs and business leaders having a positive outlook. And generally speaking, and I'm sure we'll talk about it, we're seeing that in terms of their desire to do things and get things done. But what I would say is what we all know, which is volatility and instability and some of the things we're seeing play out in geopolitics, they're obviously not conducive to the levels of risk appetite we normally like to see. And they're not conducive to really being able to make true long-term decisions.

7:01Kunal Shah:What's interesting to me though, is that I do think CEOs and business leaders at large have become a little bit more accustomed to this. I think they've had to. When you think about what we've gone through in the last few years, whether it's Ukraine or the tariff dynamics of last year, obviously COVID before that. It would be too far, I think, to say that people have just become accustomed to a much heightened level of volatility. But there's no question when I talk to CEOs, they've learned to work through these risks and they've learned to work through this volatility. And I think there's a greater tolerance for it than there has been before.

7:32Kunal Shah:And that's reflected in how they make decisions.

7:34Anthony Gutman:You actually recently wrote a piece called The Case for Europe, in which you laid out several reasons to be more positive on Europe. It sounds like you'd still make that case today, even though you technically wrote that on February 17th before all of this began.

7:49Kunal Shah:Yeah, I think, look, Kunal and I start from a basic thing, which of course is self-interested. I mean, we live in Europe, we've grown up in Europe, we run a business in Europe, and we also are trying to change the default setting. The default setting in terms of people's view on Europe, suddenly outside of Europe, but far too often within Europe is negative. And look, Europe, There are challenges in Europe. We can talk about them. But the reason we're trying to change the narrative is because we fundamentally believe that if Europe operates as a bloc, it has the opportunity to create real economic prosperity.

8:21Kunal Shah:And that's good for all of us. Look, Europe has 450 million people. It has roughly 15 % of global GDP. Its capacity to operate in a meaningful way on the global stage is clear given those fundamentals. And what we've been trying to do, like many have, is try and get Europe to operate that way rather than to operate as 27 member states. And the point we're trying to make is if Europe starts operating that way, then good things will happen for Europe and also for the global economy. And the reason we're trying to make the case is because we are seeing things starting to happen, whether it relates to more European integration, the statements that we're hearing out of Brussels and out of European leaders about their desire for an investment and savings union.

9:06Kunal Shah:Some of the discussions around deregulation, addressing that level of regulatory burden that we hear from corporate CEOs across the continent, again, is something that we're seeing real progress start to happen. And so there's a long way to go. Don't get me wrong, but our optimism is really driven by a fundamental view that Europe has the capacity to be meaningful on a global stage. It has to be meaningful on a global stage if we're really going to be able to have companies that compete both with the U.S. and Asia in a meaningful way. But we're seeing signs of that, and that's what's really driving that optimism.

9:37Kunal Shah:And, of course, events of the last two weeks are not helpful. But at the same time, they reinforce the importance of this degree of union that's so important.

9:46Anthony Gutman:Do certain countries stand out as offering particularly good opportunities?

9:53Kunal Shah:Yeah, Canal and I spend our whole time traveling around the 28 different offices we have in Europe. it's very clear that in almost all of those jurisdictions there's opportunity. It's a little bit like picking your favorite children so you don't want to get too much down this path but just based on my recent travels and Canal Can Ad I was in Switzerland last month. Switzerland's a huge opportunity for us. One of the things that's core to the firm strategy is the growth opportunity we see in private wealth. We've opened a new office there. By the way I was in Riyadh at the end of last year. There we've just got an onshore private wealth license again another big opportunity for our private wealth business.

10:29Kunal Shah:I just look at other parts of the market where we're seeing GDP growth, notwithstanding some of the other challenges. Spain, you're seeing 2.5 % GDP growth. Poland, 4 % GDP growth. So there are pockets everywhere you go. And the thing that's exciting about the European business is building out these offices is really very basic. It's driven by a strategy that we want to be close to our clients because if we're close to our clients, then we can serve them better. And that's really what we're trying to do as we continue to build out our network in Europe.

10:57Anthony Gutman:And from a markets perspective, Kunal, where would you expect to see most resilience through the rest of the year amid a lot of this volatility? So we're spending a lot of time with our clients helping them try and navigate these times. If I look at the currency space, to the point I made earlier around the dollar becoming a safe haven again, you saw broad deleveraging. But there are actually quite a few currencies that actually should stand to benefit just from the pure terms of trade impact of what are likely to be high energy prices regardless of how resolution comes. So currencies, for example, like the Brazilian Ray I, LATAM, commodity exporting companies, or the Australian dollar are ones that we actually think there will be opportunities to actually buy and get longer assets or the currency there.

11:41Anthony Gutman:Also, there are structural trends which remain on track. We've been quite positive, for example, the Chinese renminbi. And even though there was some oil dependency, the imports there are very small just relative to the sheer size of the trade surplus they have. So we do think the renminbi will continue to appreciate and outperform over the medium term. So investors, for example, have been getting along the Chinese renminbi, but pairing that with shorts and some of the currencies that are a bit more exposed, either to portfolio outflows or some of these vulnerabilities, for example, like the Indian rupee.

12:11Anthony Gutman:So the currency space is one where now we're just going to see more that differentiation between the currencies that should outperform or maybe face some pressure because of this. Interest rate markets, there are still very active debates now, because regardless of how this conflict plays out, we just have to accept the fact there is going to now be an impact on everyone's forecast for inflation higher and growth lower. And our own economists have had to react to that too by just evolving the range now of scenarios of how this could play out. And this also comes at a time that was already complicated for central bankers who were still trying to digest what's going to happen to the labor market given the technology shifts It's an AI, but now coupled with what looks like a stagflationary impulse.

12:50Anthony Gutman:So it's leading to broad gyrations. You saw a lot of pressure, for example, on the front end of interest rate pricing in Europe, but in particular also in the UK. Some is natural based on these macro shocks, but I think especially where it was down more to client positioning and deleveraging, it gives opportunities to re-engage. If you take the UK market, we actually do think they will end up cutting more than what is now priced. It may take them longer to start, given this uncertainty, but that's an opportunity. So we think fixed income markets in the UK will outperform. And I also think on a broad basis, emerging markets that had been seeing record inflows will re-exert and resume some of that trend.

13:28Anthony Gutman:Of course, there'll be some that may still face headwinds from energy, but others that will be clear beneficiaries. And we do think some of those structural forces will come back and investors will participate in those trends. I know it's very hard not to be focused on the day-to-day developments and headlines right now. But if we just zoom out for a moment, how are you both thinking about EMEA broadly? How is the firm positioned? How does the EMEA business fit into the firm's broader footprint? And how has that evolved over the past few years? Anthony, maybe you take the first turn.

14:01Kunal Shah:Sure. When Kunal and I took on these roles, you know, at the beginning of last year, we looked at a business that over the last decade had doubled its number of offices and broadly done the same with its headcount. Europe, give or take, year in, year out, will broadly be a third to a quarter of firm-wide revenues, firm-wide headcount. And again, that's been pretty consistent. It shows the structural growth in Europe and the importance of Europe. Really, the themes that we see in the firm-wide strategy are very consistent with the themes that we see in our European strategy, and that's really what we're trying to play to.

14:31Kunal Shah:I'll give you some obvious examples. The biggest one is what we've been trying to do with the formation of the Capital Solutions Group globally and the financing opportunity that the Capital Solutions Group is trying to take advantage of. And Europe is a clear opportunity there because the financing needs across infrastructure, across aerospace and defense, across renewables and energy here are very clear. Germany is an obvious example of that, but it's clear across Europe. Private wealth, I touched on when we were talking about opportunities we're seeing in Switzerland and the Middle East and other places.

15:00Kunal Shah:And again, the rollout of our private wealth franchise and the opportunity to have more private wealth advisors to take advantage of this migration of growth, this intergenerational change of wealth, I should say, from one generation to the next, but also just the creation of wealth across the community of entrepreneurs and business leaders that we serve. There's also a significant opportunity. And of course, looking on the asset management side, notwithstanding the conflict and the issues that we're seeing in the Middle East right now, we've seen significant opportunity for raising capital and raising funds for all of our alternatives businesses in particular, and particularly in the Middle East.

15:38Kunal Shah:And you will have seen the news flow, the partnership that we've signed with the QIA in Qatar, it's a$25 billion partnership, and the other work that we've been doing across the Middle East as we seek to grow out that region, because we do think we can work very well with our Middle Eastern clients to serve them in that regard. So overall, I would tell you that the strategic objectives here are entirely consistent with what we see globally.

16:03Anthony Gutman:Ginal, do you have anything to add to that? I think Anthony summarized it well. And when you think about the opportunity in Europe, it's a broad, diverse set of countries, but there are also key structural trends that also play into, for example, Anthony mentioned when it comes to opportunities that our capital solutions group can help with, take two of the key recent themes, right? Defense and then resilience when it comes to energy and renewables. Recent episodes have only just intensified the focus on those types of themes. So clearly, the markets are very focused on war developments right now, but AI has been the other major area of focus this year and in recent years.

16:40Anthony Gutman:I think it's fair to say that we've exited the phase of pure AI optimism and really entered a phase of what I would think of as hard questions, which we have talked a lot about on this podcast. So setting the war volatility aside, what do you make, Kunal, of some of the extreme sector moves we've seen this year as a release to the AI theme and how it's evolving? So I'll challenge whether we've actually exited that phase of AI optimism. Because when I speak to those that are most involved in that space, they think we hit an inflection point in the last few months. And their enthusiasm has only grown in terms of what this technology can bring.

17:17Anthony Gutman:What is clear, though, to the point you make around sector shifts, is the markets become much more discerning on where there could be disruption, where are their moats, and what are the winners and losers from this technology. And we've seen that. You've seen that very clearly in the public markets, where software stocks on either side of the Atlantic have derated anywhere from 20 % to 30%. And that's, of course, after a multi-year uptrend in that space. You're also seeing some more questions around what the returns will be on the sheer, huge scale of AI investment that we see on the CapEx side.

17:48Anthony Gutman:Equally I would say though, just look at how open capital markets are. The last few days have seen record amounts of IG issuance. So whilst the market may be discerning and differentiating between weaker and stronger balance sheets, investors are definitely still involved and exposed in this space. Our own views are the software market repricing in public markets, by and large, was people waking up to the fact that there could be certain companies that have to really now I think through the moat and how stable their growing software revenues are. Equally, we would count and say in some of these places, it's an overreaction because some of these companies really have deep connectivity with enterprises, even like ourselves, and real regulatory reasons why companies will continue to rely on them for the long run.

18:34Anthony Gutman:And someone being able to vibe code is not just going to be able to recreate their business models in any short order. So the market is starting to differentiate between these spaces. I think the credit markets are different, more because even in the private credit markets, when people look at software exposures, typically people are lending anywhere from one to six times EBITDA. That's very low relative to, say, the equity cushion. I think the market is de-rating on the equity side. We broadly still feel good about that space from the credit lens. But it's going to be a space the market continues to try and digest the news flow.

19:06Anthony Gutman:For ourselves, we're just more excited about how we think we can transform processes in our own organization and doing our best to equip our people with the cutting edge tools so we can really try and lead that innovation ourselves. And Anthony, on the point that Conaldus made about capital markets still being open, I mean, clearly we have seen a lot of volatility around the AI theme. The appetite for dealmaking, capital raising doesn't seem to be impacting that as much. Would you agree?

19:35Kunal Shah:Yeah, I entirely agree. It's just interesting if you witness the last two weeks of equity issuance in Europe alone against the backdrop of this geopolitical uncertainty. We've seen record volumes. If I look at yesterday, we did an issuance for EQT in Galderma, which was over$5.5 billion. The week before, we saw two big deals across Anatogy and Zurich Insurance. And the week before that, we saw issuance. And so we're continuing to see very, very significant levels of issuance. I think what that tells you is what we're seeing in the business more generally, particularly in the investment banking business, is activity levels remain elevated.