After years of pursuing revenue growth at all costs, driven by cheap money, markets are increasingly focusing on whether companies can translate top line expansion into profitability, Chief Executive Officer David Solomon said Tuesday in a wide-ranging interview that also touched on Europe’s negative interest rates and his plans for the bank’s investor day in January.

“It’s important for people to grow, but there’s got to be a clear and articulated path to profitability,” Solomon said in a Bloomberg TV interview with Matt Miller in Berlin. “I think there’s a little more market discipline coming into play.”

Goldman Sachs, which relies on investments with its own money as a key profit driver, last quarter suffered the worst performance in more than three years from equity wagers in public and private companies. The slump in prized holdings added to a perception that the investments are subject to unpredictable swings even as the company works to provide more disclosure.

The bank took a $267 million hit on public equity investments such as ride-hailing company Uber Technologies Inc., Avantor Inc. and Tradeweb Markets Inc. Its stake in WeWork declined by $80 million after plans for an initial public offering collapsed.

Solomon stopped short of comparing the recent troubles in the market for IPOs to the dot-com crisis, though they underscore how, after years of ultra-loose monetary policy, markets are demanding proof that companies can make money.

“The monetary policy that has been ramping around the world has basically forced people out on the risk curve, has forced people to look for other ways to drive returns, and one of the things they’ve been chasing is growth and to some degree growth at all costs,” Solomon said in the interview. “The market here is speaking and telling people here, let’s rein that in a little a bit.”

Solomon sought to put a positive spin on the failed WeWork IPO, saying it showed capital markets function properly. While there was a lot of hype around the company, investors were able to discuss the relevant financial information and “there was a pretty clear view as to whether the company could go public,” he said.

Solomon also touched on the U.S.-China trade dispute, the Trump impeachment efforts and the U.S. economy:

• On the U.S.-China trade dispute: “It feels like both are incentivized to have some sort of a phase one deal. I think the issues are complicated and there’ll be a lot more to talk about but I’m relatively optimistic.”
• On impeachment: “That process of impeachment and how that plays out, to the degree that there was an impeachment hearing and the President of the U.S. was removed from office, that would obviously be a very, very significant event. I don’t see that as something that’s likely.”
• On the U.S. economy: “There’s no question the industrial, the manufacturing part of the economy is slower, but when you look at the whole package, I think the chance of a recession in the near-term is not significant.”
• On the Fed: “The market at this point I think has the Fed slowing down, but when you look at the economic data, I’d be surprised if rates push lower from here.”

He declined to discuss the IPO of Saudi Aramco, the world’s largest oil producer, because it is an active transaction. Saudi Arabia is aiming for a valuation of between $1.6 trillion and $1.8 trillion, according to people familiar with the matter. But analysts at banks working on the deal offered wildly diverging estimates.

“Different people will have different valuations and parameters,” Solomon said. Still, “when you run an IPO process and you get an IPO process to the point where a valuation range is set and then you are actually selling securities to investors, I don’t think it’s that hard to get to a pretty narrow range for what the market expects and where buyers and sellers can meet.”

The CEO also waded into the debate about negative interest rates, suggesting history will take a dim view of that monetary policy experiment. The European Central Bank has imposed negative rates on banks for half a decade now. Some of Europe’s most senior bankers have blasted the policy, with Deutsche Bank AG CEO Christian Sewing saying it ruins the financial system in the long run.

Europe’s Experiment

While central bankers argue they support the economy, the burden on commercial banks is mounting and the industry is warning about detrimental long-term side effects. Solomon, who took over at the helm of Goldman Sachs a little more than a year ago, also questioned their economic benefit.

“When we look back on negative rates, I think when the book’s written, it’s not going to look like a great experiment,” he said. “Growth in this part of the world has been lagging and negative rates have not allowed an acceleration of that growth in my opinion.”

The losses on the equity investments last quarter add to headwinds for Solomon, 57. Shares of Goldman Sachs, which celebrates its 150th anniversary this year, have trailed peers as investors await the fallout from a global corruption scandal involving Malaysia’s investment fund 1MDB. The CEO has also struggled to revive the trading unit, and pleaded for patience with a fledgling consumer business started by his predecessor.

Solomon is tightening the bank’s partnership ranks and installing new leaders across divisions. He has promised to lay out a vision for the firm’s future at the firm’s inaugural investor day in January that could serve as a catalyst for its stock, though he cautioned on Tuesday that shareholders shouldn’t expect a shift in strategy.

“We’ve got very, very good businesses that we’re very proud of and we’d like to evolve those businesses a little bit,” Solomon said. “I wouldn’t expect any big reveal.”

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