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Donald Trump is poised to unleash more “populist” policies that will boost the US economy in the run-up to the midterm elections in November, according to Goldman Sachs chief David Solomon.
He said Trump’s populist actions, which include proposals to cap credit card interest rates, lower drug prices and curb institutional buying of single-family homes, would stimulate growth and help the investment bank’s overall business.
“We have midterm elections, and a president here in the US who is going to take populist actions as we head to those midterm elections. And those populist actions have a tendency to be stimulative,” Solomon said at a UBS conference in Miami on Tuesday.
Solomon’s upbeat assessment of Trump’s populist agenda contrasts with Wall Street’s traditional preference for free markets and minimal government intervention. The acquiescence to Trump’s unorthodox policies underscores how few on Wall Street are willing to challenge a US president known for retaliating against his critics.
Solomon cautioned that there were “plenty of things that could go wrong” given the uncertainty around trade, inflation and geopolitical turmoil.
“All these things can contribute at some level to creating speed bumps or . . . slowing down . . . some of that positive macro momentum. But in the broad distribution of outcomes, I think the likely outcome in 2026 is we’re going to have a pretty constructive year for capital markets, a pretty constructive year for M&A,” Solomon said. “And the result of that, you know, should be very favourable for the people in this room.”
The economy under Trump has performed better than most economists expected.
While many forecast a sharp downturn during the early months of the US president’s second term, the world’s largest economy is expected to have grown close to trend levels in 2025.
The latest projections from Atlanta Federal Reserve’s GDPNow model show the economy expanding by an annualised rate of 3.7 per cent, despite the longest federal government shutdown in US history.
Economists have become increasingly optimistic on the outlook for 2026, with AI-generated investment and the fiscal easing contained in Trump’s landmark tax-and-spend legislation set to boost growth.
US rate-setters in December upgraded their GDP estimates this year to 2.3 per cent, from 1.8 per cent in September.
“The economy has, once again, surprised us with its strength,” Fed chair Jay Powell said in January. “Not for the first time.”
Ahead of the midterms, Trump is hoping his nominee to replace Powell, Kevin Warsh, will be able to force through big cuts in US interest rates.
At 3.5-3.75 per cent, short-term borrowing costs are well in excess of the 1 per cent level Trump would like to see, but which most economists think would spark a fresh wave of inflation.
Warsh, who is set to replace Powell in mid-May, has said an AI productivity boom will create a disinflationary shock that will make space for rate cuts.
Since the start of the year, Trump has targeted Wall Street with populist measures amid growing pressure to address domestic affordability ahead of the November midterms.
The Republican leader has also sued JPMorgan Chase and its chief executive Jamie Dimon, and is seeking at least $5bn in damages over allegations that the biggest US bank unfairly closed his accounts for political reasons.
Investors on prediction markets Kalshi and Polymarket currently give the Democratic Party a big lead in the race to win the House of Representatives, the lower chamber of the US Congress. Meanwhile, investors expect the Republican Party to retain control of the Senate.