Goldman CEO David Solomon just aired a rare complaint from Wall Street: There isn’t enough fear. He said he was “really surprised” that the market’s reaction to what happened in the Middle East was “much softer” than expected – and warned that the severe “cumulative effect” could take “a few weeks” before investors price the crisis as they really mean.
This is a worrying signal from a man whose job description involves translating uncertainty into the spread.
As a result of US and Israeli actions in the Middle East, oil prices rose, world stock indexes fell, and the dollar strengthened as currencies moved away from risk. And yet, on the scoreboard investors watch all day, the losses seem strangely uncontrollable; The S&P 500 was down less than 1% for the week after two sessions of loss control late in the day.
The first session after Monday’s strike ended with the Dow down 0.15% and the S&P 500 up 0.04%, almost reading like a market trying to keep its appointment calendar. Tuesday was closer to honest — the Dow fell 403 points, and the S&P fell 0.94%, after the S&P had already fallen more than 2% and lost all of its 2026 gains — but still, the major indexes finished well off their lows.
And the market’s fear gauge, the VIX, tells a complicated story. It closed at 23.57 on Tuesday – the highest close since November 20 – and hit 28.15 intraday. But by Wednesday morning, it had already closed back down, down 1.03 points to 22.51, as traders tried to speculate that quiet diplomacy (or at least quiet oil) might be possible.
Cash became king. Stocks, bonds, and even gold have traded together—the kind of correlation picture that makes every “balanced portfolio” brochure look like a fairy tale. “Oil and the dollar are the only two things people want to own right now.” As global money market funds bought $47.9 billion, the biggest outflow since February 17, Michael Irwin said on Tuesday, according to Reuters.
Solomon warns that markets can hold their breath longer than people expect—until they can’t.
“There is a cumulative effect and a very severe reaction to everything that happens. We haven’t seen that cumulative effect yet,” he said. Then, he said the segment traders will likely hate most, because it means patience: “I think it will take a few weeks for the markets to really digest the implications.”
Goldman’s CEO also tried the most imaginable pivot on Wall Street: put the fight aside and talk macro. “Let’s look at what’s going on in the Middle East right now,” he said, providing a supportive macro backdrop — a period of easing, looser regulation, the U.S. economy in “solid shape” — before acknowledging the catch: “There’s actually a reasonable possibility that the U.S. economy will heat up a little bit higher this year than it’s likely to,” he said warmly. Expectation.”
