One of the most consequential trends this year has been the outperformance of global equities relative to the US.
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.
I'm here in our London office with the two co-CEOs of Goldman Sachs International, Anthony Gutmann 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.
Thank you.
Great to be here.
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?
So, Alison, 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 everywhere. across the likes of Abu Dhabi, Dubai, Tel Aviv, Riyadh, Doha, Kuwait.
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.
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 and presence.
For example, in UAE the region there's huge capital allocators, very relevant for us in wealth management business.
And from a banking perspective Zanti will know well a lot of strategic opportunities there where we hope over time we'll continue to be able to help.
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-US 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 rest of world equities prior to these intense situations emerging.
And you've seen quite quick reactions across asset markets.
The US has actually outperformed.
It had a lot of dispersion and sector rotations in January and February.
But actually, the US 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.
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 is 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.
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 try 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 opportunities.
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?
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.
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.
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 25, 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, positive CEO sentiment generally and broadly strong balance sheets, which is not spoken about a lot,
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.
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.
And that's reflected in how they make decisions.
You actually recently wrote a piece called The Case for Europe, in which you laid out several reasons 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.
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 certainly 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.
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.
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 US and Asia in a meaningful way.
But we're seeing signs of that.
And that's what's really driving that optimism.
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.
Do certain countries stand out as offering particularly good opportunities?
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 add.
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.
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.
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 REI, 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.
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.
So the currency space is one where now we're just going to see more of 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 where 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 in AI, but now coupled with what looks like a stagflationary impulse.
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 climate 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.
Of course, there will 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.
Sure.
When Canal and I took on these roles, you know 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.
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.
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, look 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.
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 of that region, because we do think we can work very well with our Middle Eastern clients to serve them in that regard.
So look overall, I would tell you that the strategic objectives here are entirely consistent with what we see globally.
Gunal, 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 recently, this year and in recent years.
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.
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 the 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 share market huge scale of AI investment that we see on the capex side.
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 think through the moat and how stable their growing software revenues are?
Equally, we'd 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.
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 derating 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.
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 Kunal just 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?
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 and Galderma, which was over $5.5 billion.
The week before, we saw two big deals across Natigy 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.
That's a good thing.
It's consistent with our view that we are in a cyclical upswing.
The activity levels that we're seeing are very much driven by strategic M&A.
And so when you think about the deals we've seen in Europe in the last month or two that we've luckily enough to be involved in whether it's Santander buying Webster Financial in the US or Zurich Insurance buying Beazley Insurance in the UK, Angie buying UK Power Networks very clear.
They're critical to these organizations to grow their scale.
And they're not deals that these corporates are going to do or not do because of AI.
They're doing them because they're growing out their portfolios, they're building their businesses and they're very conducive to growth.
And they're important in the context of scale.
So I think AI is clearly a consideration on everyone's mind.
I wouldn't say it's a decelerant in the MA that we're seeing because it's so strategic, but it's definitely a consideration.
And I think the biggest thing that we consistently see and hear from business leaders and from CEOs is that, if anything, what AI is doing is driving a view.
That scale is critical.
And again, if you're focused on scale, then the kind of things you do to grow scale is grow your business organically, but also seek to be an actor in the MA markets where you can do things that will enhance that scale.
And I think there's no question that scale is key.
Let me take another step back because We could be at another historic moment in markets.
We'll see how developments continue.
Both of you have been in these markets for decades.
I have to ask the question of, does this moment remind you of a past moment?
Any lessons you learned?
It's very difficult to say this time is going to be different.
And we're all students of history now aided by LLM.
So it's very easy to look at historical analogies.
Of course, when you start with the current energy price shock, In many ways it's reminiscent of what happened in the 1970s.
I'll confess I wasn't around then.
Anthony, you may have some childhood stories you want to share from back then.
But in reality, for me, when I look at it from a market lens, the parallels to the Russia-Ukraine shock from 2022 are very real.
And that playbook is very much in our clients' minds to try and process what the impacts from here could be.
But equally, the starting point is very different.
In 2022, you're really coming out of that pandemic shock.
Monetary policy was at very easy levels and you really had a long, prolonged markets, whereas this time you're starting from a point where monetary policy in most economies is closer to neutral.
And then it's really then a function of how long the shock persists for.
And our own base case is that the bar for central banks to respond hawkishly is still high, unless this really becomes protracted or you see increased pressure in energy markets.
But we're doing a lot of analysis.
We're trying to compare the playbooks.
The second analogy I'll make is more down to the technological shifts.
And if I compare that to say when I entered the industry back when I was an intern here in 2003, technology was evolving.
Back then there were many people that told me don't become a trader and especially don't go into fixed income, and for sure not the currencies business, because the machines are going to take over.
You won't have a career there course.
A couple of decades later, we have a thriving fixed income business and yes, the fx businesses really leverage technology, automated a lot more, become much more systematic, but we still have thriving teams of humans aided by technology, and what that technology allowed us to do was really scale the business, automate the admin and really be there to do the value add, providing liquidity and serving clients.
So when i think about right now, the technology curve and AI and these many techniques we can deploy, to me that's a very exciting time reminiscent of that technology boom.
And we're just trying to lead the charge with the applications there so that we can continue to scale and arm our humans with the best technology to help us deliver the best for our clients.
And Anthony, any lessons that you're thinking back on now?
I share that optimism, obviously.
When you think about the way our strategists talk about moments in the market where there is risk, I share their view, which is consistent.
They talk about three big things that drive downturns.
It's either there's a structural issue in the market, there's a cyclical moment, or there's an event-driven dynamic.
Now look, we all know that right now there's the risk that we're going through an event that has a significant exogenous shock on the market.
Let's hope that isn't prolonged.
Let's hope that it isn't deep, and we'll see.
Again, I come to this with a level of optimism relative to history because, both in structural terms and cyclical terms, we don't see a basis for us heading into deep-seated recessions around the world.
And that's, as I said to you at the beginning, that's how we started the year.
That's how our economists and our strategists are talking about it.
And that's what I feel when I see and when I talk to clients, generally speaking across all our business, particularly in the investment banking business.
And it's consistent with what we're seeing in activity levels, which is clients have, while they're vigilant about the risks and they're very sensitive to the human issues that we see in this conflict and other things that are going on around the world.
I would say overall, they start from the perspective that the outlook is positive and they think this is an environment where they can get things done.
I like ending on an optimistic note.
Thank you so much, Anthony and Kunal, for sharing your insights at this really interesting moment.
Thank you.
Thanks for having us.
This episode of Goldman Sachs Exchanges was recorded on Thursday, March 12, 2026.
I'm Alison Nathan.
Thanks for listening.
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