What Trend Does Goldman Sachs CEO David Solomon Believe You Should Be Watching?

Goldman Sachs Group Inc. (NYSE: GS) CEO David Solomon says watching trends in corporate earnings is vital as the nation braces for a recession, according to Yahoo Finance. 

What To Watch: A volatile stock market is expected.

"I do see a little bit more market volatility — but I think the volatility at this point, the market is expecting," Solomon explained.

He shared that although corporate earnings have remained fairly positive for the second quarter, companies will face pressure in the third quarter.

"I think you've got to watch corporate earnings," Solomon said. "And up to this point, corporate earnings have hung in reasonably well. But with a tightening economic environment, I think you're going to see more pressure on corporate earnings."

The second quarter has been strong for almost all companies but warns that it could be a misleading signal. Solomon expects that, right before a recession, corporate earnings will lag and eventually decline. 

“If you're a student of history, any time we've been in this kind of environment, a decline in corporate earnings lags.”

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This reporting season has been a fairly strong one as corporations report promising results. On average, shares have risen 1.3% following a quarter-two earnings report.  

Goldman Sachs reported a better than feared earnings call with earnings per share (EPS) of $7.73 compared to the estimated $6.58.

Price Action: Goldman Sachs shares are up 1.10% today, at the time of publishing.

Photo: Courtesy of World Bank Photo Collection on Flickr