Former Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein says he sees “bubble elements” in the stock market because low interest rates are essentially creating free money for big institutional investors.
“The wash of money is clearly creating bubble elements,” Blankfein told CNBC. “You look at SPACs, and how much money is available on the basis of someone’s reputation, as opposed to a business plan.”
Risk may also be mispriced in credit markets, Blankfein said: “People are lending to what historically have been viewed as weak credits for very little money.”
Blankfein also recently said o far the stock market doesn’t seem too upset at the prospect of Democratic nominee Joe Biden winning the presidential election, Bloomberg said.
“Perhaps folks think their stocks and 401(k)s will do better with higher taxes and increased regulation than with nastiness and scorched earth,” Blankfein said in a tweet last month.
So far the stock market doesn’t seem too upset at the prospect of Biden winning, despite Trump’s more market friendly policies. Perhaps folks think their stocks and 401(k)s will do better with higher taxes and increased regulation than with nastiness and scorched earth.
— Lloyd Blankfein (@lloydblankfein) September 30, 2020
However, other respected voices are much more optimistic about the market's future.
President Donald Trump’s top economic adviser said Sunday the economy remains in “a strong rebound” even as Americans learn to “deal with” the coronavirus.
In an interview on CNN’s “State of the Union,” Larry Kudlow argued in favor of a new stimulus bill even as he praised the conclusion of medical experts that "focused protection" can get nation through the pandemic.
But, Kudlow added, a national economic recovery won't necessarily need a stimulus.
Kudlow was asked about Federal Reserve Chair Jerome Powell’s call last week for more government spending to protect the recovery.
“It’s just getting Americans through a difficult period of time,” Kudlow said. “I don’t want to parse, but I don’t think the recovery is dependent on it.”
The U.S. will post strong economic growth in the third and fourth quarters, he said, bouncing back from the historic dive in the second quarter.
“We are are in a strong rebound,” Kudlow asserted. “Lower taxes and lower regulations going way back are still in place and businesses are reopening.”
“We are learning to deal with the virus in a targeted safe preventative way. … some targeted assistance would go a long way right now,” he said.
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