This week’s decline in financial markets isn’t surprising because the value of those assets has risen sharply during the past year, Goldman Sachs Group Inc. (GS:US) Chief Executive Officer Lloyd Blankfein said.
“It would be very abnormal if we didn’t have consolidating moves in the assets that have gone up so much,” Blankfein, 59, said today in a Bloomberg Television interview with Erik Schatzker and Stephanie Ruhle at the World Economic Forum in Davos, Switzerland.
The MSCI World Index fell 1.5 percent, the most since August, as of 11:18 a.m. in New York. The Dow Jones Industrial Average headed toward its biggest weekly drop since 2012 and the Stoxx Europe 600 Index lost 2.1 percent today, the most since June. The MSCI Emerging Markets Index slid 1.5 percent, extending its loss for the year to 5.3 percent.
The market is working through “jitters” amid a repricing of emerging-market assets, Goldman Sachs President Gary Cohn said in a separate interview. While the recent moves are “not extraordinary,” investors should expect larger swings than in the past as banks that serve as market-makers pull back amid new restrictions and capital rules, Cohn said.
“As we continue to regulate markets and continue to increase capital charges, you’ve seen all of the banks” reduce capital they commit to trading, Cohn said. “We need to get used to seeing more and more moves like this. This is just a natural evolution of where markets are headed.”
To contact the reporter on this story: Michael J. Moore in New York at firstname.lastname@example.org